Basics of Liability Insurance
Operating a business or practicing your profession carries the risk that you will receive complaints even lawsuits for accidents in your business premises or for injuries or damages caused by your service to other people.
How do you cover your business from such risk? Learn from our guide what insurance you can use to protect your business or practice.
Accidents happen and if it happens to your business and you are not adequately protected, this could be damaging. Your personal assets if you are operating as a partner or sole proprietor, are exposed to risk in this scenario if you go without adequate protection. Still, even if you are operating an LLC or corporation, the business is still liable to pay for expenses in relation to damages done to people and their properties while they were in your place of business when an accident occurred. These damages could be bodily injuries sustained by third parties – customers, visitors and suppliers – while they were in your business premises or injuries directly arising out of an action or negligence by you or your employee.
General Liability Insurance
You can minimize the risk of facing this possible liability by putting in place a risk management plan. However, even a strict risk containment plan could fail. A way to fully protect your business from this risk is to subscribe to a liability insurance policy. Having a liability insurance ensures that you will be covered from damages from a personal injury or property damage lawsuit and be compensated for the legal costs in fighting one. Liability insurance could be part of a larger insurance policy like the property and casualty insurance, in which case, it is called a business owners’ policy. Separate, but almost similar in coverage is the commercial general liability policy. The general liability insurance protects a business from the most common injury and property damage lawsuits.
State laws vary on what particular occurrence is covered and policies have a set amount of maximum coverage. When getting one, it is best to review both state laws and the terms of your policy. Also, you can get either an occurrence policy or a claims-made policy. The difference between the two is on the timeframe at which the obligation of the insurer runs. Under an occurrence policy, a claim is still valid months or even years after an accident occurred as long as that accident happened during the coverage period. Under a claims-made policy, a claim is valid if it is timely filed when the policy is still effective.
Professional Liability Insurance and Product Liability Insurance
Depending on your type of business, you may be best protected by more specific types of liability insurance – the professional liability insurance and the product liability insurance. The professional liability insurance is most suited for businesses in the service industry like doctors, lawyers and accountants. It protects medical professionals from malpractice suits and attorneys from lawsuits arising out of errors of omissions. Product liability insurance is best for manufacturing businesses. It insures a business from lawsuit arising out of mishaps, injuries, ill health effects or death caused by the manufactured item like food or toys.
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