Insurance that Protects Your Business
General liability insurance protects your business assets in the event that there is a claim or judgment against your business. Often referred to as "business liability insurance, commercial insurance, asset protection insurance, or shareholder insurance" because it does exactly that, protects assets and shareholders.
Not only does business liability insurance protect you from most of the terrible events you can imagine, but also events that you can't imagine. In Legal terms there is a criminal wrong, which everybody is familiar with, and there is a civil wrong, often called Tort. Civil lawsuits typically do not result in jail time but often in judgments or rulings where one party is awarded damages. Negligence is the most common civil wrong. Business liability insurance can help protect your businesses from the ruinous and devastating effects of large negligence lawsuits.
Commercial or business liability insurance can cover you against negligence. One simple example of negligence would be the classic example of somebody slipping in your place of business. While you may not have done anything to contribute to this person falling or any injury that was a result, you may be liable. The person who fell may say your floor was more than reasonably damp, or that a floor mat had a bump in it. Another example is as simple as somebody walking into your place of work as somebody else is walking out. In this example both parties may be injured and make the claim that the door didn't have the proper safe guards or signs to prevent the injury.
It can literally happen that fast, your business can be the defendant in a negligence case, and you could lose all you worked so hard for. Not only does this happen everyday, but negligence lawsuits are among the fastest growing categories of lawsuits being filed today. So how do you form a comprehensive liability insurance strategy to protect your business? The answer varies state by state. In many states, business liability insurance is required by law. It is absolutely critical both for affordability of your policy but also for your protection to get insured in the correct category.
For example, if your business sells some goods but also some services, what percentage of your business revenue comes from the products versus the services can have a significant impact on your premiums. Another example would be if your manufacturing business makes consumer plastics but your business is classified as a business manufacturing company instead of a consumer manufacturing company. This simple misclassification in your policy, which is one small line item, could double your premiums. It is important to work with an insurer that had a good understanding of your business and risk profile so your business be properly categorized and insured.
Many vendors, strategic partners, and outsourcers require that your business have commercial insurance simply to enter into an agreement, as they understand you may not be able to fulfill your obligations if your assets are seized in a legal battle. Often there is a cost advantage if business liability insurance is combined with worker' s compensation insurance, but not always. In most states business liability insurance also known as a Business Owner' s Policy or (BOP) breaks down into three large categories.
The Three Primary Categories of Business Insurance
- General Liability Insurance
- Professional Liability Insurance
- Product Liability Insurance
Let's examine each in turn. General liability insurance is the primary coverage vehicle for a business. This type of policy can cover; slander, libel, personal damages, property damages and miscellaneous other injuries you or your employees may have caused by accident or through negligence.
Professional liability insurance covers employers or business owners that provide services to their clients. A good example of a person that may need professional liability insurance might be a doctor, lawyer, consultant, architect, general contractor, or salon owner. Professional liability can cover errors or omissions made by the professional during the course of his everyday work.
Product liability insurance, this form of insurance protects a business against suits and claims based on an injury or wrong caused by product a business creates and/or sells. A notable example would be the millions that presidential candidate John Edwards' client was awarded as a plaintiff. In this case, the jury found that a tiny rubber piece of pool equipment contributed to the death of a small child. Product liability insurance has a very wide range of coverage and cost depending on the specific risk profile of your business. Also if your business is a specialty or niche business it may be harder to find affordable insurance, as there are less comparable reference companies for the insurance underwriter. That is why it is important to work with acompany that specializes specifically in commercial insurance, such as BusinessLiabilityInsurance.org.
What is Covered By Business Liability Insurance
The expenses that can be covered will vary, but typically you should look for the following to be included:
- Judgments, damages and awards
- Court fees
- Legal and attorney fees
- Lost productivity
- Transportation costs
- Lost profit
- Loss of use of damaged property
Lastly, there are many small things you can do to greatly reduce your liability expense. For example, you can follow insurer' s recommendations and increase safety precautions at your work place and install the proper protection devices, such as: radon detectors, carbon monoxide detectors, and smoke detectors.There are other ways to make a dent in your insurance cost, by hiring outside consultants to create risk reduction reviews and implementing their suggestions. Also consider having your vendors and clients sign agreements that limit your risk exposure, and suggest that your partners, clients, and vendors agree to settle any potential conflicts through biding arbitration. It can also help to have your vendors, partners, and clients name you as an insured party on their insurance. If your business is named on any other companies policy as an insured party, be sure to mention that to your insurance agent as it can help reduce your business insurance premiums.
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Sarah J, Chicago IL
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