As an owner of a small business, you must protect your business from potential lawsuits and that’s where liability insurance comes into play. Liability policies vary greatly depending on what kind of business you own. You should do some research on a liability policy before placing your coverage. We have come up with five things you should think about before purchasing.
1. Liability insurance is available in many different forms.
a. Commercial General Liability is a very broad insurance product. This is insurance that covers claims from accidents, injuries or negligence when the business is at fault. Personal injuries, property damage, libel and slander are just a few examples of how small businesses can be faced with if damage is done while doing a job.
b. Product liability insurance covers the legal fees for litigation involving a faulty product. It also covers any personal or property damage charges that are caused by a defective product.
c. Professional liability coverage pays for any damages caused by services. This is also called errors and omissions coverage. This coverage is for businesses that market a service instead of a product, like medical clinics have medical malpractice coverage.
d. There are other types of insurance designed for specialty businesses, for example internet only sales. The nature of your business determines what kind of coverage is necessary.
2. The type of business influences premium rates. All insurers classify businesses in several various categories, classifications play a key role in determining annual premiums. Every business has a certain degree of risk and some types of businesses have many more risks than others. A company that washes windows on a skyscraper would be riskier than a business that does tax preparation. Insurers charge on the research they have done on the number of claims made by similar businesses. To find out the risk classification of a kind of business, insurers us the North American Industry Classification System. Payroll and amount of sales made will contribute to premium amounts.
3. Liability insurance doesn’t cover everything. General liability coverage does not cover your employees if they get hurt on the job. Workers’ compensation is what you would need to have in order to cover your employee. Employee fights, criminal activity and fraudulent behavior are some examples of what general liability would not cover for your employees.
4. Liability insurance may be a requirement. Several states, including Illinois, require professionals to carry liability coverage. If you have business vehicles or you let your employees drive those vehicles, you must have auto liability coverage. State minimum liability coverage varies state to state, so it is important to discuss this coverage with your agent. If anyone in your company were to cause a claim, liability insurance provides coverage for defense costs, litigation claims and other legal fees.
5. It is possible to decrease your risks. As a business owner, you should document all the safety measures you take to reduce or eliminate risks. Doing this your insurance company may classify your business as a lower risk. Smoke alarms, fire alarms, sprinkler systems and multiple fire extinguishers help lower risks. It is also helpful to train your employees in various safety practices. Make sure all safety equipment is readily available. You should also make sure the vehicles you use in your business are maintained properly.
These are just five tips that we have come up with. We have protected Illinois businesses since, 1910. If you have any other questions or concerns, please don’t hesitate to give Frimark/Keller & Associates a call to discuss your options for liability coverage.