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Thursday, October 11, 2018

How Liable are You to Need Liability Insurance?


By Catherine Powell

Image courtesy of Picserver
When business owners ask me how much liability insurance they need to carry, I answer their question with several of my own.  That’s because there are several different insurance products lumped under the liability insurance banner.  Depending on the type of business you own, you could require more than one type of liability insurance.

What kind of products do you sell?

If your business distributes and/or manufactures products, you could very well be in line for product liability insurance. This form of liability insurance protects a business against lawsuits stemming from injury or damage caused by products.  More importantly, product liability insurance not only covers a business from injuries to a customer, but even a third party or innocent bystander.
Litigation being what it is in this country, once the lawsuits start flying, it isn’t at all unlikely that anyone who is connected to the product could come under fire.  This means you don’t have to be the manufacturer of the product to be sued.  You could simply be the distributor that sold the product to the person claiming to be injured by the product.

That being said, this doesn’t give a plaintiff Carte Blanche when it comes to filing a suit.  While a plaintiff can claim they were injured while using a product, they can’t do so if they weren’t using the product as intended.  That means if someone bought a saw from you and injured themselves while trimming their fingernails, you can’t be held responsible.  You also can’t be blamed if the person who bought the saw modified it substantially after it left the seller’s hands.

As far as the premiums for product liability insurance, the more potentially hazardous the product, the higher the rate.  To give you a quote, your insurance agent will need to assign your business a class code to properly rate it.  Product liability premiums are calculated by multiplying your annual sales by the rate, then dividing by one thousand.  If you have yet to sell any products, the premium is calculated on your estimated sales, then adjusted at the end of the year based on your actual sales.

Image courtesy of Pexels
An umbrella policy isn’t designed to keep the rain out. – It’s designed to protect your business from losses due to accidents, injuries and/or negligence.  As such is comes equipped with several components: 

     1.      General Liability Insurance provides coverage to your business from bodily injury claims, damage to others, as well as protection against lawsuits from customers and employees.  This include suits brought against the business for slander, libel, false advertising and sexual harassment.  Additionally, it covers you for medical expenses should someone sustain an injury at your place of business.  Just as with product liability insurance, the cost of providing your business with a GL policy varies depending on your industry.  That means high risk businesses pay higher premiums than do low risk businesses. Other factors such as the size of the business and its location also play into the rate calculation.  If you or your employees meet with clients face-to-face, if you or they work for others, or if you advertise your business, you need to consider a GL policy.

      2.      Commercial Property Insurance covers your premises and office equipment from damage due to fire, theft, vandalism or water damage caused by either storms or burst pipes.  Damage caused by flooding or earthquakes are not included, unless purchases separately.  When it comes to what a CP policy will cover, the list includes office automation, office equipment, furniture, inventory, exterior fixtures, fences and signage.  When it comes to determining the premium, a number of factors need to be considered. These include your business location, the type and age of the structure, average occupancy, as well as how far your business is from the closest fire hydrant and fire station.  Buildings constructed of combustible material such as wood have a higher fire rating than those made of concrete and steel.  Older buildings that have never had their electrical systems upgraded have a higher fire risk than newer construction or buildings that have been kept up to code.   A CP policy can also cover your business for revenue lost due to property damage or loss.  This way if you and your employees are forced to vacate the building while the damage is repaired, you won’t have to dig into your pocket to cover employee wages.

Image courtesy of Max Pixel
      3.      Speaking of employees, worker’s Comp covers your employees if they are injured on the job.  If you own a construction business and have even 1 employee, you are required to carry Florida Worker’s Comp Insurance.  If you own a business that isn’t engaged in construction and you have 4 or more full or part-time employees, you are required to carry Worker’s Comp.  

Are you an expert in your field? – If you are a business professional who gets paid for their advice, you need to ask about obtaining a professional liability policy. This way if a client decides to take you to court because they don’t like the job you did for them or the advice you gave them, you won’t have to shell out all the expenses for court costs and legal representation.

Catherine Powell is the owner of A Plus All Florida, Insurance in Orange Park, Florida.  To find out more ways to save on liability insurance, check out her website at http://liabilityinsuranceorangeparkfl.com/

2 comments:

  1. Who knew there were so many different kinds of biz liability insurance.

    ReplyDelete
  2. If you have a business, it can be sued - it's liable!

    ReplyDelete

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