Liability Insurance

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Businesses these days are vulnerable to many lawsuits regardless of the location or industry. Small-business owners are frequently involved in defending against claims and lawsuits arising from their business operations.

While doing business, small businesses interact with clients, vendors, employees, contractors, and any one of them can claim that a particular incident caused them injury or loss and take legal action against the business.

To defend against claims of property damage, bodily injury, libel, slander, or anything else, small businesses need to purchase the insurance policy from the right insurers. The key here is buying the policy from a trusted and reputed insurer who can help the small business owners to cover the legal fees in the event of a lawsuit.

If the claim results in a suit filed against the business, the liability insurance covers the cost of the investigation and attorney expenses. It also covers the cost of settlement or judgment.

Many small-businesses purchase liability insurances to protect against legal claims and the general liability insurance policy is the best option to cover the legal costs. But in order to get maximum benefits from this policy, it is vital that the business owners fully understand what claims are covered and when the insurer will pay for a settlement.

How does a general liability help the small business owner?

A general liability insurance policy protects small-business owners from claims arising due to injury, property damage, and negligence related to their business activities and covers the costs associated with a legal defence.

The coverage provided by this policy makes a significant business difference due to its ability to land clients and bring in revenue. It is generally recommended for small business owners to have this policy at a place as many clients require them to have general liability insurance while they sign the contract.

The commercial general liability insurance protects the small business owners by providing the financial resources during unforeseen legal events to keep the business operational.

Legal costs covered by the liability insurance:

A general liability insurance policy provides financial protection by covering the following expenses:

  • Attorney’s fees, court costs, witness fees, and police report costs incurred while defending or investigating a suit or claim against the business
  • Expenses incurred when the insurance company asks the insured to assist in his defence
  • Judgments or settlement cost arising out of a covered suit which may include the injured party’s medical expenses in case of unsuccessful defence and interest required on the judgment.
  • It also covers the premium on a court-mandated bond

Case Study:

Danish, a 33-years-old individual from Mumbai, owned a small homebuilding business which was into business since May 2015. In two years, Danish completed five new projects and had recently got a kitchen and bedroom renovation project on the outskirts of Pune. He was working there with his fellow workers and was happy about the big project that he was able to add to his list of vital projects.

Read more: How to Calculate the Premium for Product Liability Insurance?

However, one day, he accidentally caused significant damage to a wall, leaving the living room exposed to the outdoors. Due to this incident, the house became temporarily unlivable.

The homeowners filed a lawsuit against Danish for damaging a vital part of their living room and cost of temporary housing. At that time Danish felt overwhelmed, upset and indignant, but luckily, he had bought a general liability insurance to protect his small business. He contacted his insurers to take care of the lawsuit expenses that he had to bear.

The commercial general liability policy not only covered Danish for the repair cost of the damaged living room wall and temporary housing cost that the homeowners had to incur, but it also covered for the legal cost including the attorney fees and court costs.

Thus, having a general liability insurance policy helped Danish not only to secure the financial expenses of the lawsuit but also protect his business.