Business Liability Insurance Definition
Companies can limit their exposure to risks that lead to financial losses by purchasing business liability insurance policies. These insurance plans protect the insureds from liability stemming from damages suffered by clients, patients and customers, as well as properties and vehicles. Business liability insurance policies are generally optional purchases; however without coverage, companies are jeopardizing their assets, as well as their ability to stay in operation.
Other People Are Reading
-
What Does it Cover
-
A business liability insurance policy covers many risks that a company faces during operation hours. Some of these risks include property damage, employee injury, personal injury from slander and fire damage. This policy also makes payments to cover medical expenses of injured parties and the insureds' wages that are lost when they are in litigation. The actions of employees, staff members and independent contractors hired by the insureds are also protected from liability under this policy.
Benefits
-
The purchasing of a business liability insurance policy transfers the risk from the insured to the insurance company. Any claims made against the insured are investigated by the insurance company to confirm its validity. The insured also receive financial assistance in paying for its legal defense from the insurer. If a settlement is reached between the insured and the injured party or a judgment is awarded to the plaintiff, the insurance company pays the amount up to the policy's coverage limit.
-
Considerations
-
When applying for business liability insurance policies, several factors are taken into consideration to determine whether applicants are granted or denied coverage and how much their premiums will be. Information from the applications such as the business's location, claims history, work industry and coverage amounts are very important factors. Premium amounts charged by the insurance companies can be higher or lower than their standard rates, depending on the applicant's level of risk.
Misconceptions About Liability
-
A company's liability does not expire once business operations are terminated for good. In fact, a business can be sued for damages several years after they close their doors. A business owner is left unprotected against these claims since a liability policy is generally canceled upon the closing of a company. This policy only pays out when it is "live," or in effect. To prevent this situation, a business owner can purchase run-off coverage, which protects the insured for an additional period of time after the business is closed.
Warning
-
Without a business liability insurance policy, a company is responsible for paying any claims made against them out of pocket. Even if a company or professional wins a liability case in court, paying for legal defense can set them back tens of thousands of dollars. With huge award amounts being handed out in court, a company that doesn't have insurance protection is putting its financial assets at risk. Also, there are states that require certain businesses to purchase this type of insurance. In Colorado, for example, doctors must have medical malpractice insurance, which is a form of business liability insurance, to operate their practices.
-
References
Resources
- Photo Credit Oppenheim Bernhard/Digital Vision/Getty Images
