Limited Liability Insurance: Separating Fact From Fiction

Dec 22, 2019 | Business Insurance

When you start a business, you’re probably getting industry credentials, producing income, hiring staff, stabilizing cash flow, securing a strong market position in your industry, and growing the company. Insurance may be not be something you immediately think of. But with so many things you read online, how do you separate fact from fiction when it comes business insurance, let alone limited liability insurance?

Limited Liability Insurance

Limited Liability Insurance is an essential investment for any type of business, as it protects both individuals and companies. It serves as a shield for unexpected lawsuits from stakeholders and other work-related scenarios, and prevents double taxation and separation of personal and business-related expenses. However, it does not cover individuals from liabilities, and it is the responsibility of each person in the business to invest in their own individual insurance.

Are You Protected From The 33% of Lawsuits Against Small Businesses?

Why’s Limited Liability Insurance Recommended?

As stated above, limited liability offers personal protection from litigation. While it’s true that being part of an LLC offers some protection by separating business assets from personal ones. Still, it has a lot of loopholes and limitations (in comparison to having specific limited liability insurance) that can further harm you and your business from high level risks that can entail costly & unnecessary expenses. Having limited liability insurance further divides these areas of your life, and boosts personal security.

Outliers and Nonparticipants

Outliers and nonparticipants that pose threat and selfish interest in you and your business can inflict consequential damages that could bring about legal actions against you as well as industry malpractices that put you in the opposition. All these circumstances only mean one thing: expenses. Additional liabilities & compensatory damages could have easily been avoided if adequate limited liability insurance has been procured.

Furthermore, having this coverage will avert exorbitant legal costs being thrust upon you in business-related litigation. Let’s use an example to illustrate:

If you’re a dentist who practices alongside other dentists, having your own limited liability insurance is vital in case a patient tries to sue the company. By having this insurance, your business assets are protected in the company.

Therefore, you and your personal assets have protection from a lawsuit involving your company. Hence, saving you from the worst scenarios possible.

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What Types of Limited Liability Insurance is Available?

Now that you are aware that having limited liability insurance is a necessity and a lifesaver, it’s only fitting that you familiarize yourself with several different limited liability insurances.

There are several different liability insurance options to consider, and not everyone needs every type of coverage. Choosing one that suits your requirements is essential. Below are some options to consider.

Commercial Property Insurance

If your business requires a lot of physical resources, commercial property insurance could be essential to consider. This type of insurance is necessary for almost every type of business since most companies occupy physically owned/rented properties for office spaces, storage areas, and a location for production. Companies involved in real estate, industrial, and production or operations-heavy businesses should consider having this type of insurance for their companies

Commercial Properites

Commercial property insurance insures your company’s physical assets (Building, furniture & fixtures) in the event of unexpected perils. Perils such as but not limited to:

  • earthquakes
  • floods
  • storms
  • tsunamis
  • fires
  • explosions
  • war
  • civil commotion
  • theft
  • vandalism
  • act of terrorism

It is evident that most, if not all, of these predicaments, are unavoidable and can incapacitate your business in ways unimaginable. That is why financial advisers & insurance sellers recommend commercial property insurance for business owners.

Document Keeping

Commercial property insurance varies in coverage for businesses. Valuation of the property and keeping documents such as POs, ARs and physical assets are important for protection in the event of a claim. Virtual businesses may also stray away from this type of insurance, but businesses should take an inventory of their business before taking out insurance.

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Contractors Professional Liability Insurance

Contractors’ professional liability insurance is for contractors, architects, building engineers, designers, construction firms, etc. While commercial property insurance is more general. This insurance shields workers from work-related errors like environmental impact claims and lawsuits. It also covers common human errors caused by:

  • unclear building design patterns
  • complex wiring systems
  • third-party hires’ negligence
  • omissions of blueprint or design plan details.

Litigation and Lawsuits

This insurance covers infringement and noncompliance claims. It doesn’t cover personal injury, property damage, or other basic liabilities like the general liability policy. So, it’s best to pair it with other limited liability insurance that centers on employee welfare. Location, industry, coverage limits, and other factors can impact the premium calculation.

Product Liability Insurance

Product liability insurance protects businesses from lawsuits over product malfunction, misuse, or harm. Exporters, entrepreneurs, wholesalers, vendors, and makers benefit because it covers all costs. However, suppliers and distributors are liable for consumer harm caused by their goods.

Consumer Protection

The Consumer Safety Act details product liability insurance. Business insurance is wise because the premium depends on your goods.

When calculating your company’s exposure, estimate compensation claims and public liability coverage. Include other risk factors and don’t skimp on insurance. Investing can protect your company from unexpected liabilities and costs.

As an LLC, making investments for any business is essential,
so ensure you have limited liability insurance as it protects individuals and companies.
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Errors and Omissions Insurance

Consultants and financial advisors use Professional Indemnity Insurance (E&O). It shields professional service providers from client distress claims.

It protects your professional services, business assets, and company image from negligence and unintentional errors, unlike traditional liability insurances that cover bodily injuries, natural disasters, and property damages.

The Errors and Omissions Insurance is proven to be a beneficial investment to companies like law firms, accounting/financial institutions, consultancy firms, advertising agencies, real estate agencies, and industry professionals.

E&O insurance doesn’t cover the insuree’s deliberate risk, so those considering it should know. This insurance won’t cover false advertising, fraud, or wrongdoing, so ask for one right away.

Business Liability Insurance

Business liability insurance is a type of insurance that is suited to small or medium businesses, including single-person services. It comes in three main types: general liability insurance, professional liability insurance & product liability insurance.

Sole proprietorships and partnerships tend to purchase this insurance due to their vulnerable nature and lack of corporate and personal protection. It covers legal burdens, medical costs, compensatory expenses, bodily injuries, property damages, and personal indemnification. It is still a viable option for some businesses that do not require specific needs for their companies, as general claims can happen unexpectedly.

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employees and everything you’ve worked hard for?
Liability insurance can help ensure you’re protected against accidents
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Employment Practices Liability Insurance

Employment Practices Liability Insurance (EPLI) is a form of liability insurance that protects individuals and corporations from the physical, psychological, power abuse, sexual, etc. of workplace misconduct.

It comes with other management liability policies and protects owners from lawsuits brought on by their employees. EPLI provides protection against litigations such as wrongful termination, discrimination, harassment, deprivation of job opportunities, contract breach, and employee mismanagement.

Business Owner’s Policy

Business Owner’s Policy (BOP) is an amalgamation of property and general liability insurance.

BOP is an insurance option for small or medium businesses (SMB owners) who work in their own space. It covers all the policies in the standard and incorporates more comprehensive policies to further expand the scope of the insurance.

BOP provides financial aid in case of catastrophic and other unexpected events, including office building, company equipment, bodily injuries, income losses, and possible lawsuits. The cost of the premium for BOP depends on the attributes chosen to include, such as type of business and/or profession, history of claims, total property valuation, location of the business, and leveled risks.

Ready to Purchase Limited Liability Insurance?

Investing in insurance is a sound investment and should not be taken lightly as it can put personal and business assets at risk due to an inescapable decline in the economy, an unexpected act of nature, or a lawsuit.Choosing the right insurance can be difficult as it is important to know your business well and seek professional advice on what you may need.

Protect your business, your employees and everything you’ve worked hard for with Business Insurance. Get a quote or speak to one of our Business Insurance Experts at (877) 658-2472 today!

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