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Commercial Liability Insurance

by Admin on October 27, 2011

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n this economy, financial management is often done with a scalpel. One item that often gets cut is commercial liability insurance. Before slashing this expense, though, it’s best to know what it actually buys. Liability insurance gives businesses a way to manage the risk that something you do or make harms someone who made, bought, used, or expected to benefit from it. Liability insurance can cover some or all of the loss is you are sued. Paying a monthly insurance premium buys the right to transfer the impact to the insurance company. Without insurance, damages awarded in some cases could mean financial ruin. You could lose all your financial assets, your home and a successful future in a chosen profession. The impact of these losses is, of course, dependent upon the type and amount of interest held in the company.

From a human perspective, sole proprietorships, small partnerships and limited liability companies can suffer the most severe impact. Unfortunately, they are also more likely to forgo commercial liability insurance. The amount of insurance you choose is based on three things: the likelihood of the risk becoming an event, the impact of the event on the health of your business and your budget.

How Much and in What Kind of Insurance Should You Invest?

How much and in what kind of insurance should you invest? The type of commercial liability insurance products you need depend upon what your line of business. As you can imagine, if you manufacture pharmaceutical products your liability will be considerably more than if you make paper airplane kits, though in our litigious society it’s reasonable to assume, both types of businesses have been sued. There are four common types of liability insurance products designed to address various types of risks.

  • General liability insurance protects a company from third party claims.
  • Directors and officers liability, commonly called D and O, covers the actions and omissions of company directors or officers. This type of insurance protects the rest of the company from ruin because of the acts of one or more of its directors or officers.
  • Employer liability is most commonly known as worker’s compensation. If an employee is hurt on the job or suffers some illness from exposure to chemical fumes, Worker’s Comp compensates the worker for lost pay and other possible damages. However, it is really designed to keep the company from failing financially should an injury claim result in money damages. Malpractice insurance protects medical professionals such as doctors, nurses, dentists and diagnosticians.
  • Professional liability is similar to malpractice insurance. The purpose for professional liability insurance is to protect industry “experts” in a particular field, whose services may not be covered by regular general liability insurance. Professionals in the fields of science or technology, for example, are held to a higher standard. Their advice is likely to be understood as a statement of best practice. A computer expert who recommends your company install a particular type of computer on employee desktops is more liable than your cousin who loves her new laptop and thinks you should buy the same one.

Considering Risks

Whether or not all factors of a risk becoming an event are under your control, they should still be considered. If you own a coffee shop, it is reasonable to assume that a customer might handle hot drinks with the care and skill you hope they would. However, In 1994, was awarded over a half million dollars when she burned herself with coffee served at a fast food drive-through. Notable in this case is that a jury had originally awarded her nearly 3 million, which the judge later reduced.

Could your business sustain this type of loss? Are you making pharmaceuticals or paper airplanes? Clearly if you’re a one or two person operation, you won’t spend too much on worker’s compensation or D and O. If your directors and officers can impact the investments of others or their livelihoods, some level of D and O insurance is prudent. Taking a close look at the potential liabilities your business faces may be a little like going to the doctor for a check-up when you don’t feel sick. You may be afraid of what you might learn. However, being well-informed gives you the power to make wise choices.

Understanding Commercial General Liability Insurance

In the following video you will get some great tips and explanations about commercial liability insurance. These commercial liability risk management and insurance tips are from a company in the uk but the most advices are also useful for in the US.

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