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Liability Insurance Defined and Explained

If you run a business, chances are you’ve heard people tell you that you need business insurance policies. They are probably right!

When you operate a business with a sizable customer base, you probably need liability insurance. Want to know more about liability insurance and why you need it? Keep reading!

What Is Liability Insurance?

Liability insurance is a policy plan that protects companies against the financial impacts of property damage or injuries to third parties. If, for instance, someone gets injured on your company’s property, they may sue you. When you get liability insurance, it will protect your business from having to pay for legal defense costs.

Unlike common insurance plans, a liability insurance policy will provide financial compensation for third parties. This happens when your company is found to be legally liable for the events that resulted in harm.

Types of Liability Insurance

There are different liability insurance coverages for different aspects of risk that your business may be exposed to.

Workers’ Compensation Liability Insurance

Workers’ compensation insurance offers financial coverage for workers when they experience an injury that was incurred in a work-related scenario. If a construction worker gets injured on-site, for instance, they may request financial compensation because of their injuries. Otherwise, they may also sue because of the circumstances.

This insurance plan will offer financial compensation for medical bills, lost wages because of the injuries, and any legal defense costs you have to incur as the employer.

If an employee’s death has a work-related cause, you will also be required to pay their family members.

Product Liability Insurance

If your business includes selling products to the public, you will need product liability insurance. This plan will protect your company against legal claims arising from injury or damaged property because of your product.

For instance, if someone buys an energy drink from your company and ends up getting seriously sick, they may end up suing you. These scenarios can be highly disastrous for a business’ finances and its reputation. It’s crucial to make sure you can pay the legal defense costs and defend your company in court.

Professional Indemnity Insurance

What happens if you offer accounting advice to a client but they come back months later saying your advice made them lose money?

If your company functions in an industry where you offer professional advice to clients, you will need professional indemnity insurance. This policy protects you from somebody suing you because of your advice or professional service. This is likely to happen when someone suffers a substantial loss after following your advice.

In order to safeguard your reputation as a high-quality service provider, make sure you are prepared for this occupational risk.

If you work in the medical industry, you will need to have medical indemnity insurance. This is usually a requirement to be licensed to practice.

Management Liability Insurance

Running a business is difficult, and there are plenty of risks you, your directors, and other senior members will face daily.

Management liability insurance will protect you from legal claims directed against you or your directors. This can be because of mistakes that resulted in harm, or cases of fraud.

Why Should You Have Liability Insurance?

Running a business without having liability insurance is like running into a storm with no jackets or umbrellas. These are some reasons your company needs liability insurance in order to survive.

It Protects Your Business From Unexpected Circumstances

When running a business, you are exposing yourself to a lot of risks without knowing when they may end up affecting you. Having to face a lawsuit out of nowhere will drain your finances and can prevent your company from operating to its best potential.

Having liability insurance will protect your business from these types of scenarios. You will not have to pay for lawsuits out of your own pocket and will be able to finance all the costs. This will ensure the survival of your company as well.

You Can Have More Clients

With large contracts, clients will more likely be very meticulous about who they deal with. The dealbreaker can be whether you have enough insurance coverage for your firm.

You Are Protected Against Claims From Employees

Often, the most damaging lawsuits can be those that come from within your own company. Employees may sue you for issues such as slander, so it is best to keep your company protected at all times.

You Can Maintain Your Reputation

Facing a lawsuit can be detrimental to your reputation. This is enhanced if you don’t have enough finances to restore or offer financial compensation, or if you can’t defend yourself in court because of finances.

The good news is that having an insurance policy will protect you financially and can offer you support when trying to restore business operations.

The Importance of Liability Insurance to a Company

When you run a company, you will want to have liability insurance to protect your firm from unforeseen circumstances that can be financially damaging. There are plenty of different insurance plans that protect your firm against different scenarios. This can include instances such as being sued for slander, product mishaps, or work-related injuries.

Contact us today to learn more or request a quote.