Why Businesses Need Liability Insurance


Buying insurance is not one of the favorite activities of business owners.

There are simply too many types of insurance from too many providers. And, of course, you don’t have insurance unless a crisis strikes.

However, if this crisis occurs, the right insurance coverage can make or break your business.

Liability insurance is one of the most basic forms of business coverage, although there are different variations. Here’s the rundown to help you get the big picture and decide which type you need to protect your business – or if you need it at all.

What is liability insurance?

In general, it protects you if someone takes legal action against you for accidents, injuries and negligence.

It will cover your obligations as well as your legal defense.

The classic example of when you need liability insurance is a customer who is injured on your business premises. For example, they might trip over that floor that you failed to secure. Or they could receive an electric shock from that piece of wiring you were intending to fix.

Therefore, you could face a potentially ruinous lawsuit. In this case, having coverage protects you.

However, there are different types of liability insurance – some of which go far beyond this classic case.

What are the different types of liability insurance?

For starters, liability insurance covers all injuries and property damage that customers, customers, delivery people and other non-employees may suffer on your premises. They usually cover legal fees as well as settlements and judgments.

Then, professional liability insurance covers you against claims for negligence or malpractice. It is also sometimes referred to as errors and omissions insurance. For example, if you are a financial advisor and your advice causes someone to lose significant amounts of investment, this type of insurance will protect you in the event of potential lawsuits.

Another type of liability insurance is professional liability insurance. This helps you deal with claims filed against you by current, former and potential employees. For example, if someone sues you for workplace harassment or discrimination during the hiring process, employment practices will have you covered.

One of the newer types of liability insurance is computer liability insurance. This type of insurance protects you against legal claims from customers and customers if you are the victim of a cyber breach.

Imagine that your computer systems were hacked because one of your team members used a weak password. Now you need to contact all of your customers to let them know that their data is in the hands of cybercriminals. Not only will this lead to a monumental loss of confidence in your business, it can also lead to legal action.

Cyber ​​liability insurance covers the costs of informing customers and monitoring their credit. It also helps you deal with legal fees and potential extortion claims from criminals.

Does your business need it?

In general, the type of liability insurance you need – or if you need it – really depends on the type of business you’re running.

If you ever host someone in your business premises, general liability insurance is strongly recommended. This is valid even if you run your business from your home. Your home insurance generally does not cover injuries or accidents of people who come for work purposes.

Suppose you are a freelance architect and you have remodeled a few rooms in your house into an office and space to meet with clients. You also have a puppy who can get carried away when playing with someone new. A simple dog bite accident and the resulting legal claims can bring your entire business to the brink of ruin.

On the other hand, if your business operates primarily online or processes sensitive customer data in the virtual sphere, cyber liability insurance is a wise investment. Especially given the increasing rates of cybercrime since the start of the pandemic. This especially applies to digital professionals such as web designers and SEO specialists, as well as anyone who deals with personal, financial or tax information.

When it comes to professional liability insurance, you can see the number of people you employ as an indicator of how likely you are to need them. The more people there are on your team, the more likely it is that one of them will take legal action against you.

For professional insurance, the considerations are different. Whenever you provide any services that could cause bodily injury, property damage, or financial disadvantage to someone, you should seriously consider purchasing this type of insurance. Plus, many larger contracts require you to have errors and omissions coverage before you can sign.

Conclusion

Liability insurance is one of the cornerstones of a well-balanced business insurance strategy. It can help you defend against legal claims. Additionally, it helps your business overcome crises such as crashes or data breaches that could otherwise be disastrous.


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