What is Limited Liability Insurance?

Limited liability insurance only covers a business owner for the amount of the company or partnership that they actually own. This limits their exposure to risk to a fixed portion of the asset in question, reducing both the amount of money that they need to pay for insurance and how much is paid out in case the policy is actually triggered.

Significance

Even if you own or are part of a partnership in a limited liability corporation, that does not mean that you are completely insulated for any litigation. Companies can be sued for being involved in injuries, defaulting on debts, failing to meet the terms of a contract or any number of additional legal issues. Limited liability insurance can protect both your personal and professional financial security if you have an ownership stake in a small business or partnership.

Types

The most common kind s of liability insurance purchased by limited liability companies involve negligence, which are broadly separated into additional categories of professional error insurance, accidental insurance, property damage and more. Depending on the business, there may be actual legal requirements to be professionally insured. Even if it is not a requirement, being an insured business is often a positive marketing distinction.

Function

Liability insurance helps to protect a business against unpredictable eventualities, reducing the dangers of making errors. It enables higher productivity, as while workers still have to worry about mistakes, they don't have to be concerned that a single major error could put a stake through the heart of the business. A common example of this is liability insurance for a moving company. If one of the movers breaks something that belongs to a customer, the insurance policy covers the cost of the error and compensates the customer for the damaged property.

Features

Limited liability insurance is common when the ownership of the business is spread across multiple people. It does make the policies more complicated, but it ensures that the business is covered and that each owner is protected for the amount that they have a stake in the business. Many businesses have organizations that you can join that allow you to purchase liability insurance at group rates. This helps to keep insurance costs down and promote the long term prospects of your business.

Benefits

Limited liability insurance is very helpful for shareholders of limited liability companies, as it helps them to know that their investment will remain secure. While it can help to examine liability statistics for the relevant industry, the past litigation environment is not necessarily an indicator of what shape events will take in the future. Conservative investors in small companies should cover their ownership stake with policies above the average rate if they wish to protect their assets even further.

Resources

• Business Liability Insurance
• State Farm : Business Liability Insurance Information
• Business.com: Business Liability Insurance Listings and Quotes