Running a business isn’t easy. You’ve got to plan for all sorts of possibilities, from staff shortages to company vehicle leasing to supply and demand issues. Another very important decision you’ll have to make is about liability insurance. But get it right, and you’ll only have to do it once.
Here are 5 tips to choose the right liability insurance policy for your business.
Learn to Expect the Unexpected
No matter how well-qualified you are, there’s always the risk of errors or omissions in your professional capacity. Even if you’re adamant that you made no such error or omission, these situations are often open to speculation and subjective interpretation.
Errors and omissions do not always constitute negligence. To be found guilty of negligence, you must fail to provide the requisite degree of care and skill expected in your field. However, you may still be held liable for loss or harm caused by errors or omissions.
This can harm your professional reputation. But should a client bring a lawsuit against you, and a damages claim, it becomes a lot more serious. You’ll need adequate legal protection.
Fortunately, there is a type of liability insurance tailored for this purpose. It’s usually called Professional Liability insurance but is sometimes also known as Errors and Omissions Insurance. This covers the cost of third-party lawsuits as a result of your professional error or negligence.
Get Help From the Experts
In any industry, for any situation, business owners often resort to consulting the experts. This is true for your finance, tax, investment, and even marketing issues. Insurance should be no different. Unless you have in-depth knowledge about insurance, finding the right policy for your business needs can be tricky.
Get help from the insurance experts, and discuss your needs with them. You have two options — insurance agents, and insurance brokers. They are both licensed professionals who can help you choose the right liability insurance for your business. But there is one big difference between them.
Agents represent the insurers, while brokers represent you, and ultimately have to deal with insurance agents on your behalf. An insurance broker works with a variety of carriers. An insurance agent typically represents a much smaller number of insurance providers.
Regardless of which one you choose, they’ll be able to advise you on all aspects of insurance. However, both types of insurance professionals may specialize in a specific area of insurance. So be sure to find one who deals exclusively with business liability insurance, for the best results.
Consider Your Company’s Budget Constraints
No business choice can escape the realities and constraints of the budget. There are various insurers offering liability insurance, and the pricing may differ widely between them. Consider your budget and find one your business can afford.
If you’ve chosen to go through an insurance broker, they make most of their money off commissions from selling insurance. Be aware that they may also charge you a broker fee. However, you might find that you still end up saving money, if they find you a better deal.
Whether you go through an agent, a broker, or contact an insurer directly, be honest about your company’s budget limitations. It’s easy to become convinced to purchase liability insurance your business won’t really need. State clearly what your business needs, and what you can afford.
Being underinsured is always risky, as it can cost your business dearly should any type of disaster strike. But there’s no real benefit to being overinsured as the monthly premium costs will be high.
Combine Insurance Types when Possible
As a business owner, you are always on the lookout for ways to streamline your business processes. Do the same with choosing a liability insurance policy, and combine your liability insurance with other insurance your business needs.
An example of this is a Business Owner’s Policy (BOP).
A BOP plan combines General Liability and Commercial Property insurance coverage. This may be cheaper than purchasing two separate insurance policies. It also cuts through the admin headaches of having two separate policies, possibly from different insurers.
Another example concerns Employer’s Liability and Workers’ Compensation.
Employer’s Liability covers your legal costs should an employee sue for damage or injury on the job. A policy in line with Worker’s Compensation covers their costs (usually medical). Both are important, which is why they’re often sold together. But Workers’ Compensation can have Employer’s Liability built-in.
Match Your Unique Liability Risks
Unless you operate your business from home and don’t use a vehicle, you’ll need Automobile Liability insurance. There are different policies to choose from here, too. Get the type that matches your unique risk profile.
Automobile Liability covers damages caused to a third party or their property while driving a business vehicle. It doesn’t cover damage to your business vehicle, or injuries you or employees may sustain. It’s designed to cover your liability to the other party.
Commercial Auto insurance covers medical expenses, property damage, and legal bills if your business vehicle causes an accident. This is the right choice of liability insurance for most businesses that own company vehicles.
If you or your employees use your privately owned vehicles or hired vehicles for work, you’ll need a Hired and non-owned auto insurance (HNOA) policy, instead. In this instance, non-owned means the vehicle is not owned by the business, yet is used for the business.
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