When operating a business, there are definite risks involved. For one thing, thereâ€™s sure to be a certain amount of traffic coming and going on the premises. With this guaranteed traffic comes the risk of bodily injury or property damage that could occur with third parties. Therefore, when accidents happen, business owners should have liability insurance to protect their businesses against possible lawsuits.
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Types of Liability Insurance
There are several kinds of liability insurance and business owners should learn about the types of coverage available so they can choose the proper coverage for their company. Following are a few examples of liability insurance that are common choices for most business owners:
â€¢ General liability: broad coverage of third-party injuries and damages;
â€¢ Product liability: injuries received by consumers from products manufactured by the insured are covered under this insurance;
â€¢ Professional liability: covers injuries resulting from use of services provided by the insured; and
â€¢ Employee liability: covers injuries or sickness of the business ownerâ€™s employees when received on the work premises or as a result of performing the job.
When discussing specific types of liability business insurance, the coverage chosen will depend on the details involved with each business. However, when discussing general liability insurance, businesses can choose coverage for the following types of third-party claims:
â€¢ Bodily injuries: a business client sustains injuries on the business ownerâ€™s property;
â€¢ Libel or slander accusations (personal injury): third parties experience some type of defamation of character as a result of something said by business owners or their employees;
â€¢ Medical expenses paid for the injured up to a stated amount;
â€¢ Defense costs for the insured: attorney and court fees covered in the event the insured goes to trial; and
â€¢ Loss of income and payment for reasonable expenses incurred during the investigation of the claim.
Finding the Right Insurance Company and Determining Liability Rates
Determining rates for insurance plans depends on various factors such as the type of business, number of employees, business location, total revenues earned, and number of claims for prior losses experienced. Of course how much and the type of insurance the business owner believes is needed is also taken into consideration. Prospective clients should be prepared to divulge as many details as possible regarding their companies so agents will be able to make the correct assessment regarding their insurance needs.
Business owners can do the research themselves by going directly to specific insurance companies to receive their individual quotes. They can also have the research done by agencies that gather and review information from prospective clients and match it with competitive rates from several insurance companies (sometimes called aggregator services). No matter which method is chosen, business owners should consider the following:
â€¢ Look for a company that has flexible payment options such as credit and debit card, phone and online payments, check and automated payments;
â€¢ The company must have a dependable customer support team thatâ€™s available 24 hours a day to handle claims, provide prompt damage assessments, and handle all other important issues that may come up; and
â€¢ Without a doubt, clients want to be absolutely sure theyâ€™re dealing with a reputable company thatâ€™s financially sound, and that has a wide assortment of types of coverage from which to choose.
Make Sure to Get the Best Possible Rates
Business owners should review and compare at least three quotes from three different companies and they should be particularly aware of any exclusions, restrictions and possible deductibles. Keep in mind that when deciding final rates, insurance companies look favorably upon the following factors:
â€¢ Good risk management procedures within the company are noted and rewarded;
â€¢ Some insurance companies will offer a significant discount for switching from one insurance company to their company;
â€¢ Discounts may be offered for home-based businesses;
â€¢ Discounts offered when prospective clients have not submitted a claim for a certain amount of time; and
â€¢ Many companies offer discounts when clients purchase more than one product with that company (i.e., in addition to liability insurance, clients also purchase auto and life insurance).
Examples of Quotes
Itâ€™s very difficult to give actual quotes because there are many details and components involved with determining final rates. However, to present some idea of what can be expected, the following are simplified quotes for general liability insurance in the computer consulting business:
â€¢ Independent Contractor with annual revenue of $150,000: can get approximately $6,000,000 worth of insurance with a $500 deductible for an annual premium rate of $425 to $900.00;
â€¢ Consulting company with seven employees with annual revenue up to $1,000,000: can get approximately $7.5 million worth of insurance with a $500 deductible for an annual premium rate of $500 – $900.00; and
â€¢ Consulting firm with 60 employees with annual revenue up to $10,000,000: can get approximately $7,000,000 worth of insurance with a $1,000 deductible for an annual premium rate of about $3,600.00.
Keep in mind that obtaining insurance quotes are free with no obligation to the requestor. Also, there will likely be other types of liability insurance required (i.e., professional, workers compensation, employee liability) which will increase the annual premium rates listed above significantly.
In addition, different types of businesses will command different rate quotes. The important goal should be to look for affordable rates even though depending on the type of coverage needed, this could mean paying what might be considered costly premium rates. However, owners should weigh paying costly premium rates against the catastrophic costs resulting from lawsuits that could end in major financial setbacks or even loss of the business entirely.
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