Liability insurance is a key part of any business' insurance defense plan. It is important that you find affordable business insurance that suits your personal circumstances. There are many online sites where you can obtain free quotes on what it would cost you to purchase liability insurance.
What is it?
Commercial general liability coverage insures a business against accidents and injury that might happen on its premises, as well as exposures related to its products. It will protect a business from payments for bodily injury or property damage to a third party, for medical expenses accruing to the underlying incident, for the cost of defending lawsuits including investigations and settlements, and for any bonds or judgments required during an appeal procedure.
No matter how thoroughly you try to remove all possible hazards from your business, you could still be sued for accidents resulting from something as simple as the carelessness of a customer. General liability insurance is your last line of defense against devastating claims for things over which you may have little or no control.
How Much Coverage do you Need?
Generally, experts say, $2 million to $3 million of liability insurance is sufficient. The good news is that liability insurance isn’t priced on a dollar-for-dollar basis, so twice the coverage shouldn't be twice the price. The price you pay for coverage depends on the size of your business, measured either by square footage or by payroll, and the specific risks involved.
Many small businesses have difficulty figuring out how much liability insurance they need to have. There are some guidelines to consider, but no standard formula. Determining the amount of liability insurance to buy is an important task, since there appears to be no limit on lawsuit awards. One idea is to use a recent liability settlement in an industry related to yours as a guide, or you could base the amount on your business' total assets. Either way, it is a good idea to discuss it with your insurance agent and check for recommendations from your trade association.
Exclusions:
It is important to note that general liability insurance policies tend to have a lot of exclusions. Be sure to make sure you understand exactly what your policy does and doesn't cover.
In some cases, you may want to purchase additional liability policies to cover specific concerns. For example, many consultants purchase “errors and omissions liability,” which protects them in case they are sued for damages resulting from a mistake in their work.
Companies with a board of directors may also consider “directors and officers’ liability” insurance (D&O). This type of insurance protects top executives against personal financial responsibility due to actions taken by the company.
Companies requiring higher levels of coverage than provided with their commercial general liability insurance often augment the policy with an umbrella liability insurance policy. Umbrella insurance provides additional coverage for areas where you are not insured, coming into effect once a certain deductible, or self-insured retention level, is met. Contracts for umbrella insurance are usually tailored to each account, and the risks covered are generally negotiated.
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