Taking calculated risks is part of running a successful business. But these risks can also make your business vulnerable to issues that could lead to big financial losses and tarnish your brand image. Hence, why your company should consider getting liability insurance coverage. Company liability insurance is an important insurance policy that can help protect your business’s finances and image. Let’s delve further into what company liability insurance is, what it covers, and why it’s necessary for your company to get one.
Company Liability Insurance
Having company liability insurance can protect a company’s financial interests if its owners become the subject of formal legal action or any third-party claim. This insurance protects the policyholder against any direct financial liabilities that may be incurred and any legal defense costs.
Company liability insurance includes employers’ liability, public liability, product liability, professional indemnity, directors and officers, and umbrella plans.
Types of Company Liability Insurance
There are several types of liability insurance a company can get to protect its assets; they include
#1. Employers Liability Insurance
Employers’ liability insurance is a legal requirement if you have one or more employees. It protects you from liability if one of your employees is injured on the job. Additionally, employers must carry employer’s liability insurance as well as workers’ compensation insurance to cover employee injuries and deaths. Also, employers’ liability insurance covers legal fees and worker injuries.
#2. Public Liability Insurance
Public liability insurance protects a business from customer, public injury, and property damage claims. If the public or customers allege that the company’s work caused bodily injury or property damage, the public liability insurance will cover any compensation or legal fees. It protects companies from unexpected costs if an accident occurs on company property or while employees are abroad.
#3. Product Liability Insurance
Companies that sell items to the public need product liability insurance. It protects them if their products kill or injure someone. The corporation could be sued for selling a defective product.
#4. Professional Indemnity Insurance
Professional indemnity insurance covers customer compensation and legal fees if a consumer sues a corporation for fault in professional services. Also, professional indemnity insurance is essential if a business advises other firms or handles client data or intellectual property.
#5. Directors’ and Officers’ Liability Insurance
Directors’ and officers’ liability insurance protects directors and executives of large firms from legal judgment. Also, from costs resulting from illegal activity, bad investment decisions, and other mistakes. Company directors have many legal obligations, making it highly relevant.
Other types of company liability insurance coverage include:
- Umbrella liability policies are personal liability policies designed to protect against catastrophic losses
- Personal liability insurance covers individuals against claims resulting from injuries or damage to other people or property experienced on the insured’s property or as a result of the insured’s actions.
- Professional liability insurance, also known as errors and omissions liability insurance, covers lawsuits arising from negligent professional services or failing to perform professional duties.
Why Does a Company Need Liability Insurance Coverage?
It is important for every company to get liability insurance, as it protects many liabilities that can expose a company’s assets to large claims. Liability insurance protects businesses from lawsuits and damages from accidents, product recalls, etc. Company liability insurance also covers the cost of legal actions from third-parties.
Company Liability Insurance Cost
When it comes to the cost of company liability insurance, there are several factors that can affect the price. They include the following:
- The type of insurance will impact the cost. Public liability insurance can cost anywhere from £50 to £500 per year. While employers’ liability insurance costs from £61 to £200 or more per employee per year.
- The industry the business operates in will also affect the cost. For example, public liability insurance for a builder could easily cost 10 times more than a self-employed personal trainer.
- The size of the business and the number of employees will also impact the cost. Employers’ liability insurance costs more for each additional employee, but the additional premium drops.
- The cost will also depend on how risky the work is that the employees do. For example, employers’ liability insurance can cost over £1,000 per employee for particularly dangerous professions like scaffolding.
It’s important to note that while the cost of company liability insurance can seem expensive, it’s required by law and can protect a business against significant claims.
Construction Company Liability Insurance
Construction company liability insurance is a type of business insurance that covers property damage, third-party injuries, or damage claims, specifically for construction companies. It is also known as builders’ risk insurance or course of construction insurance. Additionally, construction company liability insurance is designed to protect the builder from liability in the event of property damage, injury to workers, or injury to members of the public.
The construction industry is one of the most dangerous industries, and due to the rate of non-fatal injuries, the fines for hiring someone without employer liability can be severe. Employers’ liability is a legal requirement for any construction company that hires employees. Whether full-time, part-time, contractors, or temporary, you’ll need employers’ liability before you bring them on board. It protects your business from legal cases if a staff member is injured or becomes ill due to having worked for you.
Contractors all-risk insurance, or builders contractors insurance, is a policy designed to cover all the risks you might encounter during a construction project. This could include physical damage to the works and site materials you were contracted to undertake, which is normally excluded under a standard public liability policy.
Cleaning Company Liability Insurance
Cleaning companies need liability insurance to protect themselves and their clients in the event of accidents or damages. There are different types of company liability insurance coverage available, but the most common and essential ones that cleaning companies may want to consider include the following:
- Public liability insurance: This type of insurance covers the cost of unintentional harm to someone else’s property or injury to a person that the cleaning company causes.
- Employers’ liability insurance: This type of insurance is required by law if the cleaning company has employees. It covers the cost of injuries or illnesses experienced by employees while working for the company.
- Business and office equipment insurance: This type of company liability insurance covers the cost of damage to business and office equipment, such as a business laptop or specialist cleaning equipment.
- Tools insurance: This type of insurance covers the damage or loss of cleaning equipment.
- Legal expenses insurance: This type of insurance covers the cost of legal protection against court costs and compensation bills, especially concerning client or employee disputes.
- Personal accident insurance: This type protects against the financial difficulties of injury and illness. It covers accidental injuries to anyone covered by the policy, whether at work or off-duty.
Limited Company Liability Insurance
Limited company liability insurance protects your business from financial loss due to compensation claims, lawsuits, injuries, or property damage caused by your business operations.
- Public and product liability insurance is crucial coverage for a limited company. It protects you from compensation claims arising from injuries, illnesses, or property damage caused by your business operations.
- Employers’ liability insurance is required by law for a limited company that employs staff, even if they are contractors or seasonal staff. Failure to have this insurance can result in fines per day for each uncovered employee.
- Professional indemnity insurance is another popular cover for limited companies, protecting against compensation claims for errors or oversights that cause financial loss to a third party.
Other types of insurance that may be relevant for your limited company include personal accident insurance, contents and office equipment insurance, tools insurance, stock insurance, building insurance, and own plant insurance, among others.
A limited company may be required to buy liability insurance, such as employers’ liability insurance, if they have staff. Even if not required by law, buying liability insurance coverage is a good way for a limited company to mitigate financial risks arising from lawsuits or other losses.
What Does Company Liability Insurance Cover?
Company liability insurance provides businesses with coverage against lawsuits and third-party claims. These insurance plans cover legal fees, direct financial liabilities, injuries, and property damage.
What Is Business Owners Liability Insurance?
Business owner liability insurance is a type of insurance that provides protection to business owners against lawsuits and claims made by third parties. It is usually sold as a package that combines different types of insurance coverage required by business owners. This package is known as a Business Owner Policy (BOP).
Business Owner Policy
A business owner policy (BOP) is commercial insurance designed for small and medium-sized businesses. This policy combines general liability and property insurance into one package, which typically reduces the premium, making it a more cost-effective option than separately purchased policies. This policy typically includes property, business interruption, and liability insurance.
The BOP typically includes property damage, business interruption, and liability. However, coverage may vary among insurance providers. Businesses can opt for additional coverage such as crime, spoilage of merchandise, forgery, fidelity, and more. The BOP covers properties such as buildings, business-owned items, or items owned by a third party but kept temporarily in the business or business owner’s care, custody, or control. The business property must usually be stored or kept in qualifying proximity to the business premises, such as within 100 feet.
What is Employers’ Liability Insurance vs. General Liability?
Employers’ liability insurance and general liability insurance, also known as public liability insurance, are two types of insurance policies businesses can purchase to protect themselves from financial losses resulting from claims against them.
Employers’ liability insurance is a legal requirement for most businesses that employ staff, regardless of their size. This insurance policy covers the cost of compensation, damages, and legal fees that an employee, whether current or ex-employee, is entitled to due to illness or injury caused by working for the business.
On the other hand, general liability insurance, also known as public liability insurance, covers claims made by third parties, such as customers or visitors to the business premises, for injury or damage to their property due to the business’s activities or presence. This type of policy is designed to protect the business, its employees, and its owners from external legal action and the costs associated with a legal defense.
The main differences between employers’ liability insurance and general liability insurance are:
- Purpose and coverage
- Employers’ liability insurance covers employee claims for injuries or illnesses caused by their work.
- General liability insurance covers claims made by third parties, such as customers, clients, vendors, and passersby, for injuries or property damage caused by your business.
- Legal Requirements
- Employers’ liability insurance is a legal requirement for any business that employs people. Failure to have adequate liability coverage can result in fines per day.
- General liability is not a legal requirement, but many businesses require it to protect themselves from high compensation costs and legal fees in case of a claim.
What Are Examples of Company Liabilities?
A company’s liabilities are financial obligations to others, usually money, goods, or services. There are two types of liabilities: current (near-term) and non-current (long-term).
Current liabilities are expected to be paid within one year, while non-current liabilities are due in 12 months or more. Examples of current liabilities include:
- Accounts payable: money owed to vendors for goods or services received but not yet paid for
- Payroll expenses: wages and salaries earned by employees but not yet paid
- Payroll taxes: taxes withheld from employees’ paychecks but not yet paid to the government
- Accrued expenses: expenses that have been incurred but not yet paid, such as utilities or rent
- Short-term notes payable: loans or credit lines that must be paid back within one year
- Income taxes: taxes owed to the government for income earned but not yet paid
- Interest payable: interest on short-term credit purchases to be paid
- Accrued interest: interest on loans that have been earned but not yet paid
- Unearned revenues: They are sums of money that customers have paid in advance but have not yet received.
- Dividends payable: the amount owed to shareholders after the dividend has been declared.
Examples of non-current liabilities include:
- Long-term debt: bonds payable and other loans with a maturity date greater than one year
- Deferred taxes: taxes that will be paid in a future period
- Pension obligations: money owed to employees for future pension benefits
- Warranty liability: estimated amount of time and money that a company may spend repairing products under warranty
- Contingent liability: a liability that may occur depending on the outcome of an uncertain future event
- Liabilities of discontinued operations: the financial impact of an operation, division, or product line held for sale or recently sold.
Is Business Insurance the Same as Liability Insurance?
Business insurance and liability insurance are not the same, but liability insurance is one type of business insurance. Business insurance is a broad term that can include several insurance policies, such as property insurance, business interruption insurance, and liability insurance.
Conversely, liability insurance protects businesses against legal costs and compensation claims by third parties due to injury or damage caused by business activities. It covers the costs of any legal defense and compensation payouts if someone makes a claim against the business.
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