As a business owner, you are an independent entrepreneur acting as your own boss and defining your own success. However, often your independence limits the funds you have available should anything go wrong.
All businesses have vulnerabilities. These range from issues with the market to crimes such as theft, but you can also be vulnerable to other issues. These can include lawsuits for damages caused by your products or services, an injury on a job site, or even a fall on your property. Due to these risks, you need to protect yourself with liability insurance.
Here we explain everything you need to know about liability insurance so you better understand how it helps your business stay afloat even when faced with lawsuits that could otherwise leave you in financial ruin.
What is liability insurance?
Liability coverage provides protection for yourself and your business from financial losses, should an related third party r file a claim against you whereby they could have sustained damage to their property or caused bodily injury due to your negligence.
There are different types of liability insurance, each protecting you from different types of claims, ranging from errors or omissions in your professional services to product liability for injuries or damages suffered from something you produce and sell.
If you don’t have liability insurance and you do get sued, you can face unmanageable financial losses in judgements and legal fees that can cause a lot of hardship. .
Why You Need Liability Insurance
Small businesses need to take a proactive approach to protect themselves against the many liability risks. From property damage and product faults to poorly performed professional services, every business has its associated risks.
Everyone from electricians to beauty salons should protect themselves with liability insurance, as it allows you to run your business without fear of lawsuits that could destroy your livelihood.
What are the types of liability insurance?
In general, most companies should consider at least one of the following:
General liability insurance
Almost all types of insurance policies have some form of general liability insurance included. It’s essential for every business type, as it protects you against both bodily injury and property damage suffered on your business premises, and from the products and services that you offer.
This coverage provides funds to help cover your legal expenses as well as any damages caused due to your negligence.
Professional liability insurance
Also known as Errors and Omissions insurance, this is an important policy if you offer professional services from lawyers to accountants, to chiropractors to spa services.
You will be protected against claims to recover financial losses in a business-to-business lawsuit or bodily injuries for business to consumer lawsuits.
Insurance for directors and officers
If your business has a board, officers, and executives, you could face serious issues and lawsuits surrounding everything from environmental issues to unfair competition to corruption to even tax evasion.
In these cases, although officers are responsible for their own actions, you can still face financial challenges should charges or lawsuits occur because of their actions. With this type of insurance, you are covered for anything that results in financial consequences for their illegal activities.
If you are found liable for an injury, whether it is a customer, a postal worker delivering the mail, or maintenance workers taking care of your property, you are protected with a liability coverage provided in the business insurance policy.
Even if it’s someone slipping on your icy front or getting cut by a rusty shelf edge in your store, if someone is injured on or off your premises, you are liable for costs associated with those injuries. Bodily injury insurance covers all costs from medical care to lost wages.
Property damage liability
As the name implies, this type of policy protects you if your business causes damage to someone else’s property. While this might seem unlikely, it can cover many different events from spills at a worksite that ruin curtains and rugs to faulty tools catching fire.
Product liability insurance
If you make and sell products, there are hundreds of possible scenarios that could lead to lawsuits. If your product causes damage to a person or their property, you will be responsible and face financial consequences that could end your business.
This type of insurance mitigates risks associated with things such as design defects, manufacturing defects or even marketing defects due to inaccurate labelling or poorly defined usage instructions.
With the proper coverage, you can avoid costly lawsuits and ensure your business and customers are safe.
Other Types of Liability Coverage
While basic liability policies cover the most general issues every business faces, there are other types of coverage you can consider, including:
Cyber risk and data breach coverage
Technology has changed the way most companies operate. Even basic services have some form of technology, such as email, to communicate amongst your team, as well as your customers.
This leaves you vulnerable to potential cyber-attacks. This threat is on the rise, with the potential for a cyber event leading to all kinds of issues, especially if it puts your customers’/patients’ information at risk.
These events are extremely costly and increase the odds of not just a single customer suing, but a class action if your entire system is compromised. Cyber risk and data breach coverage will help cover some of the expenses faced in the case of a successful cyber-attack.
Equipment breakdown insurance
If you depend on equipment to perform your services, equipment coverage is always recommended. This way, you are also reimbursed for electrical or mechanical damage not covered by other types of content or property insurance.
Commercial auto insurance
Commercial auto insurance will protect employees and vehicles used for business purposes not covered by personal auto policies.
As you can see, liability insurance is an important aspect of your business. If you would like more information, speak to our experts at Bow Valley Insurance today.
Coverage is subject to policy wording, terms, conditions, and deductibles. Protection is limited to the perils, coverage, exclusions, and limits shown on the policy.