Liability insurance, also known as third party insurance, is a popular insurance product for business owners. Small businesses, in particular, can immensely benefit from the coverage provided by this type of business insurance.
Small businesses, in particular, can benefit from liability insurance as they will be covered against claims made by third parties and/or employees. These claims can run into hundreds of thousands of rands that a small business may not be able to pay. Considering that small businesses are typically cash-strapped, liability insurance can provide financial protection to small companies. This will allow you, as a small business owner, to focus on running your business. Small business owners in high-risk professions can greatly benefit from liability insurance.
What Is Liability Insurance?
Liability insurance provides you with protection against claims made against you or your business by third parties. These claims relate to injuries, damage to people, and property damage. Should your business be found liable for any legal fees and payouts to a third party, your insurance policy will cover these.
Note that liability insurance policies generally don’t cover costs and claims related to intentional damage, contractual liabilities, and criminal prosecution. To be sure you’re aware of your policy’s exclusions, have a chat with your insurance provider. In addition, liability insurance pays third parties — not the insured.
Liability Insurance Coverage For Small Business
Small businesses can protect themselves and their owners with various types of liability insurance. These are:
- Personal liability insurance
- Public liability insurance
- Employers’ liability insurance
- Business liability insurance
- Directors and Officers (D&O) Insurance
- Errors and Omissions Liability Insurance (E&O)
- Product liability insurance
- Motor liability insurance
Personal Liability Insurance For Business Owners
If you run a sole proprietorship, you may want to consider purchasing personal liability insurance. Your finances will be protected if you are held legally responsible for claims as a result of injury or damage to a third party or their property.
The business of a sole trader is not separate from its owner therefore you assume the risks of the company, which means you have unlimited liability. To a certain degree, personal liability insurance protects you from this.
Public Liability Insurance Cover
Public liability insurance coverage provides insurance against legal liabilities that businesses could incur towards members of the public who frequent the company’s premises or to whom they render a service. Your small business will be covered against settlements or court awards, as well as legal costs.
Liability claims can be extraordinarily costly, so being adequately insured can help you and your small business.
Employers’ Liability Insurance
Also known as Workmen’s Compensation, employers’ liability insurance benefits an injured employee and their employer. Employees are given guaranteed benefits, and employers are protected against claims for injuries workers sustained on-the-job and occupational diseases.
In South Africa, all employers must register with the Compensation Fund as it is statutory insurance. This is per the directives of the Compensation for Occupational Injuries and Diseases Act (COIDA).
Business Liability Insurance
Business liability insurance is the mainstay of business insurance, and for good reason. It protects the company in the event it is taken to court or has claims filed against it by a third party who is not an employee of the business. Third parties include suppliers and customers, to name a few.
Lawsuits that could arise include the business being sued for breach of contract and alleged negligence. Small business owners should note that you may not be covered for events that occurred before the insurance contract was signed.
High-risk professions such as law and accountancy typically require small business owners in these fields to have business liability insurance.
Directors’ And Officers’ Liability (D&O) Insurance
Directors and officers can be held personally liable for claims made against them for any unfavourable decisions made on behalf of the company. These decisions could have detrimental impacts on the profitability of the business and shareholder value.
Directors’ and officers’ liability insurance covers the directors’ and officers’ personal assets in the event of lawsuits and claims made against them. It also covers the legal costs and settlement fees that may arise during the lawsuits.
Errors And Omissions Liability Insurance
Also known as E & O liability insurance, errors & omissions insurance covers businesses if they are held liable for damages and expenses to persons who’ve experienced financial loss due to negligence or bad advice.
This insurance will cover the company’s legal defence costs and any damages it will be liable for. Do note, though, that legal defence and damages costs are restricted to the limit of your cover.
Medical professionals (for example, a misdiagnosed patient who misses work and pay due to inadequate care and advice given to them by their doctor) and those working in finance can immensely benefit from this coverage.
Product Liability Insurance
Product liability insurance provides financial cover to a business in the event of customer claims made against it for injury, illness, or death from the use of the company’s defective product(s). These products include food, toys, or furniture, sold to the customer.
If the business is found legally liable, the product liability insurance will pay for the legal fees or medical costs that arise. Should the company not have product liability insurance, it will have to pay for these costs out-of-pocket.
Motor Liability Insurance
This type of insurance provides cover to the insured if it was responsible for a vehicle accident that resulted in a third party experiencing accidental loss or damage to their property. This covers financial liabilities resulting from claims made against the insured. Motor liability insurance is also known as third party car insurance.
How To Get Liability Insurance For A Small Business
As a small business owner, you’ll have to do your due diligence and contact several insurance providers to get adequate cover. Visit comparison websites and view their quotes and product reviews.
Best Small Business Liability Insurance
Liabilities aren’t fun to think about, but they can be considered a cost of doing business. You’ll have to look at getting liability insurance for your business to protect it from severe financial loss. Thankfully, there are many insurance providers to choose from in the market. Shop around for affordable liability insurance for your small business.
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