Points to Consider with Liability Insurance | Wednesday December 31st, 2003 | |
What are the basics of liability insurance? How can I secure liability insurance for my business?
Liability insurance will help protect you from being held liable—responsible—for physical and personal injuries that occur while persons on the premises of your business. You will need to enlist an insurance company, broker or agent to help you purchase insurance policies. Some pointers for picking a company or agent can be found below.
What is insurance, and how can it help your business? Insurance is a system in which you, the businessperson, pay a premium (sum of money) to insure that your business is protected in case of loss, damage or theft. Insurance has been described as a “system in which winners pay losers.” This is because those people who pay premiums and never have to collect from their insurance pay for those people who pay premiums and do have to collect from their insurance. If you never have to collect from your insurance, consider yourself lucky, and consider your premium an investment to both help other businesspersons and give you financial piece of mind. If you do have to collect from your insurance, you can consider yourself fortunate because your losses are covered by the premiums of yourself and other businesspersons.
Liability insurance differs from other insurance in that it offers your protection from being liable—bound to pay—for injuries that happen to other persons while on your premises. You may be liable for injuries or harm to customers and employees, as well as other individuals who visit or utilize your business premises. In some cases, you may even be liable for injuries that occur to people who trespass (illegally enter your business or property) and become injured. Because of the wide variety of liabilities that a start-up business person has, it is necessary to insure yourself properly.
You know what insurance does, but what does liability insurance specifically do? Liability insurance can do a number of things—it can cover injuries to your employees and customers, protect you from law suits brought by trespassers, and cover legal charges in case you are sued for injury caused to someone while on your premises. Some liability insurance may even protect you from claims of personal injury, such as libel and slander, if you are in an industry at-risk for these, and have the proper addendums to your basic coverage.
Before talking to an insurance agent or broker about liability insurance, consult industry organizations and other small business owners to find out what types of liability coverages they recommend. What are the liability risks for your industry? What is it most important for you to insure against, and what is the risk of a liability suit being brought against you?
For Example: You own a catering company. While on a delivery, one of your employees strikes another car and causes injury to the other driver and her property. You are liable to pay for injuries and property damages caused by your employee, so having the right liability coverage can save you time, money and headaches.
It is important to remember that you can be sued for injuries on your premises even if you took “reasonable care” to prevent them.
For Example: Your employees do heavy lifting at your work place, and one of them is injured while putting a large box on a shelf. Even though you have provided your employees with ‘proper lifting training’ and weight belts and gloves, you may still be liable for their injury. Because not even your appropriate safety measures can always protect you from liability suits, carrying liability insurance is absolutely necessary.
How do you choose an insurance company, agent or broker to help you draft and purchase your liability policies? Talking to other small businesspersons and industry organizations is a good place to start. Find out what types of coverage other small business owners in your area carry, and what they consider their highest liability risks. You may not, for instance, need to protect yourself against defamation and slander in your ‘line of business,’ but you may need to protect yourself against the threat of trespassers becoming injured on your property and suing you. Discuss these needs with your insurance broker or agent, who should also be able to help you decide what types of coverages will be essential for your business. Be sure to review your policies carefully, note what is covered, what the terms of your coverage are, and how you report injuries or incidents if necessary.
Don’t be afraid to ask questions when you meet with an insurance broker or agent. As a start-up businessperson, no one will expect you to know everything about insurance, and it’s better to ask a hundred questions before you buy your policies than to buy policies you do not understand and cannot use effectively. Remember that insurance will be essential to your business, so take your time to review policies and guidelines, and talk to your agent or broker about any concerns you may have.
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