Liability insurance (also known as general liability insurance) protects you from the financial fallout that comes with being sued. If you’re in business, you need it to protect yourself and your business from situations like these: Someone slips and falls on your property because of an unsafe entrance or cracked floor tiles in your office building; the chair they were sitting on breaks; they slip and hit their head on the tile, knocking themselves unconscious; and then they sue you for medical costs, lost wages, and pain and suffering.
What Is Liability Insurance?
Liability insurance is a part of a general system called risk financing. Risk financing involves buying insurance or making other financial arrangements to cover your risks. For example, if you own your own home, you don’t pay for fire and theft protection out of pocket because it’s included in your mortgage payment.
In that case, your mortgage company acts as an insurer and carries coverage with one or more insurers on your behalf. If there’s a fire, they’ll make payments based on what they’re covered for under their policy—but if they weren’t covering any losses at all (if they didn’t have any liability insurance), then you’d be responsible for all damages yourself.
What Are the Types of Coverages Offered by a Liability Policy?
A liability policy offers coverage against lawsuits and claims, which can be extremely costly to a business. Generally, a liability policy will cover you if someone is injured on your property or if one of your products causes injury or damages property. A business owner might think that his or her homeowner’s insurance policy would cover any liabilities associated with owning a small business, but that is not necessarily true.
There are three different types of liability coverage available: general liability, products-completed operations hazard, and professional indemnity. They offer varying levels of protection depending on what level of risk you want to assume and how much money you are willing to pay each year in premiums.
How to Decide Which Type of Policy Is Right For You
Each type of liability insurance has its own advantages and disadvantages that you need to keep in mind when deciding what kind is right for your business. Some liability insurance policies, such as products-completed operations or completed operations-only policies, don’t cover claims related to unfinished work. If you leave an operating machine unattended, someone could use it improperly and cause an injury.
That would be covered by your general liability policy—as long as it was part of your business at that time. But if a customer uses a piece of equipment not yet completed by your business and they are injured while using it improperly, it may not be covered under a products-completed operations policy or a completed operations policy.
What is an Umbrella Policy?
An umbrella policy is a special type of liability insurance that kicks in when your normal liability coverage, such as your car insurance or homeowner’s policy, doesn’t cover all your damages. An umbrella policy can be useful if you are sued because it will pay out any remaining damages once your other policies have been depleted.
To keep costs down, make sure to purchase an umbrella policy with excess liability limits at or above your existing liability coverage limits. If you don’t have an umbrella policy, you should seriously consider getting one because there are many circumstances where it could help protect against major lawsuits.
How Does an Umbrella Policy Compare to Other Coverage Types?
It’s important to note that liability insurance is different from other types of coverage you may already have. For example, health insurance, homeowners insurance, and auto insurance are not going to cover you in case your business causes harm to a third party—they are designed to protect you from accidents or damage within your home or car, respectively.
It’s still advisable that you look into these other forms of coverage and ensure they provide what you need, but it’s also advisable that your small business has some form of liability coverage just in case something goes wrong with one (or more) of your projects. To learn more about how to protect yourself when starting a business, request a quote today!
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When you’re starting a business, it can seem difficult to think about what insurance you need. This can lead to not having any coverage or underinsured protection. As your business grows, so will your risk. And while most people agree that they need insurance at some point, figuring out which type and how much coverage is right for you can be tough.
Here are a few tips to help make sure you have enough liability insurance coverage: Ask yourself questions like If my company was sued because something went wrong with my products or services and I lost in court, would I be able to pay my legal fees? What about if someone got injured using one of my products? Do I have adequate coverage through work? Is what I have enough?
General insurance ( liability insurance) Features
Although most people think of health insurance as their primary type of coverage, you also should buy general liability insurance if you own a business. You probably won’t use it often, but when you do need it, you’ll be glad you have it. The three basic types are property damage, personal injury, and advertising injury.
If your company is sued because of something that happened on your premises or with one of your products, property damage will cover any losses you incur from damaged or stolen property. Personal injury covers claims resulting from injuries to employees and customers on your premises or caused by a product sold by your company. Advertising injury covers claims that result from false advertising about products or services sold by your company.
Benefits of Liability insurance
The best way to protect your business is to buy liability insurance. An entrepreneur who does not have adequate liability coverage leaves his or her personal assets vulnerable. This type of insurance helps provide a buffer if you are sued, which can happen if someone becomes ill or sustains an injury while on your property and, you are found liable.
If a vendor suffers a loss because they were not paid, they may sue your company, in which case your business would be responsible for paying it back with money from its own funds. Liability insurance is similar to health insurance in that it protects both parties from unforeseen circumstances that could be expensive. But unlike health insurance, liability is often specific to each individual state and entity-level—so make sure to do some research about where you’re operating before buying coverage.