Tag: Business Insurance

When you first start dreaming about your small business, it’s fun to think about grand openings, happy customers, and meeting your financial goals. However, before doors open or those first paychecks go out, it’s important to address some of the less-fun parts of your business, like risk management.

One of the most basic types of business insurance you can purchase to protect your business is third-party liability insurance. Read more to find out if third-party liability insurance is the right fit for your needs.

What Is Third-Party Liability Insurance?

A third-party is a person unrelated to your business. So, third-party liability insurance protects your business from lawsuits, claims, and damages when a third-party is injured at your place of business. A third-party liability plan might be included in a business owners plan (BOP) which bundles general liability, commercial property, and sometimes business interruption service.

According to the government, up to 53% of small businesses experience a lawsuit. If a third-party — customer, visitor, contractor — injures him/herself at your business, this is the insurance coverage you’ll need to avoid devastating financial claims against your company. Liability insurance is sometimes referred to as “slip and fall” insurance because slips and falls are the most common third-party liability claim. If your business is held liable for damage and medical bills, this policy protects against the financial damage of litigation.

Third-party liability insurance is an add-on to your general liability, commercial property, or commercial auto plan. Ask about third-party liability coverage when you meet with an insurance professional to discuss your needs.

What Third-Party Liability Insurance Covers

Third-party liability insurance is a specific policy that covers third-party injuries, and damages and claims relating to a third-party injury.

• Bodily Injury To Someone Or Property Damage Because Of Your Business/Employees: If a customer slips and falls on a spilled margarita or your contractor breaks a client’s toilet while working at their home, this insurance will cover the medical bills for your customer, legal costs to defend yourself in a lawsuit, and repairs.

What Third-Party Liability Insurance Doesn’t Cover

Third-party liability is a special add-on bundled into a business owners policy, commercial property plan, or a commercial auto plan. However, there is a lot that a third-party plan doesn’t cover. Here are some of the things that should be covered through other insurance policies:

• Negligence: If it’s proven that accidents happened because of your own negligence, it is quite possible the insurance company will not pay the claim.
• Fire/Flood/Property Damage Sustained From A Natural Disaster: Some natural disasters are covered under commercial property insurance. (Flood and earthquake are often extra endorsements.)
• Protection From Giving Bad Advice: If having clients and giving advice is part of your business model, this insurance protects you from a lawsuit that’s a result of your bad advice. Honestly, why doesn’t this insurance exist for everyday life? I don’t know.
• The Loss Of Income If You Need To Close Your Doors: Business interruption insurance will help with lost income and the cost of relocation if a disaster causes you to shut down your business (or if a leader property suffers damage).
• Vandalism: Damage to your building as a result of vandalism is covered under your commercial property insurance.
• Employee Injuries: While general liability will protect clients and customers, it’s not there to protect workers from the financial burden of an injury on the job. Any business with a single employee (state laws apply) needs worker’s compensation insurance to cover employee injuries.
• Car Accidents: If you use your car for business or if you have a fleet of vehicles you use, you will need commercial auto insurance.

Who Is Considered A Third-Party?

A third-party is a person unrelated to your business. Every day, there are customers, contractors, and non-employees who might interact with your business. Essentially, a third-party is a legal term that represents someone affected by a company’s actions but not directly related to the company itself. Any insurance issues that involve members of your staff would not be covered a third-party liability policy.

How Third-Party Liability Insurance Policies Work

Let’s say someone slips and falls on your property and sues you. The third-party liability policy will pay for medical and legal bills. Your insurance company will provide lawyers and assistance to guide you through the process.

Assuming you’ve insured your small business for one million dollars of third-party liability coverage, and the medical bills and the legal defense (including judgments and settlements) is more than one million dollars, you would only owe any balance over your policy limit. If it was one million, three-hundred dollars, you’d only owe the three-hundred dollars. (This would be after your deductible is paid — you will set your deductible limit with your insurance expert.)

If something happens that you think might lead to a lawsuit, it’s never a bad idea to call your insurance company immediately and make a record of the incident right away — including the date, time, and names of any witnesses.

Which Insurance Policies Include Third-Party Liability Insurance?

Every insurance provider is different and the various bundles will vary. However, you may typically find a third-party liability endorsement as an addition to a commercial auto policy, a business owner’s policy, a general liability policy, or, sometimes, under your renters/homeowners insurance policy.

How To Buy Third-Party Liability Insurance

When you are ready to make a purchase, there are quite a few places to secure a general liability policy for your business. If you already have an insurance policy through a carrier, check with a broker or insurance agent there to see about bundling a third-party liability policy into your plan.

But with thousands and thousands of insurance carriers, how do you know which one will work well for you?

Most insurance companies carry a basic form of commercial general liability insurance with third-party liability. You can use a website like Coverhound, Coverwallet, or Insureon to enter your business information and receive comparison quotes.

Additional Types of Liability Insurance

There are many different types of liability insurance options for your company. Each policy is designed to cover a specific area of need for your business. Here are the main liability insurance policies available:

Talk with an insurance expert to see which policies are right for your business.

Who Needs Third-Party Liability Insurance?

While only you will be able to decide what insurance packages are the right fit for your business, third-party liability insurance is an important foundation for risk management. If you run a business that has customers, has a storefront, ships goods, or provides services, then adding a liability policy is a must.

We live in a society that is quick to litigate and assumes businesses are covered by insurance when, in fact, many are not. At the bare minimum, consider a general liability policy with a third-party liability endorsement.

How Much Does Third-Party Liability Cost?

As with all insurance policies, the cost will be determined by the type of business you run and the amount of coverage you think you’ll need. However, since third-party liability is the most basic and foundational form of insurance, it is not terribly expensive.

According to CoverWallet, the average monthly price for general liability is between $40-100 per month. Some of the things that may affect that monthly premium are:

• Your specific risks
• How much liability insurance you need
• What type of business you run
• The size of your business
• How many employees you have
• The location of your business

Final Thoughts

According to the Insurance Journal, in 2015 the average cost of a “slip and fall” lawsuit was around $20,000. If you don’t have that sort of money lying around to pay for medical and legal fees, then a policy for as little as $400 a year is not just a needed business expense, it is imperative. Third-party liability, which protects others from your mistakes, is a crucial part of your risk management plan.

The insurance industry might be in the business of worst-case-scenarios, but a liability insurance policy doesn’t have to set you back significantly and the protection it provides is priceless. This is especially true if you live in a state that is known to favor plaintiffs over small businesses in a court of law. Do your homework, research the best policy for your business and industry, and get covered today!

Professional liability insurance goes by many names: Errors and omissions insurance, indemnity insurance, or malpractice insurance. But no matter what term is used, professional liability insurance protects your business from lawsuits that claim you gave bad advice or made a mistake. We all make mistakes and when we do, we hope the effects won’t be widespread or catastrophic, and we certainly hope people won’t sue us. But when things go wrong, people want someone to blame in our litigious society, so if you’re the person who gave the advice in a professional setting, you may be liable for the effects of those errors.

If your business is at risk from these types of lawsuits, then you’ve come to the right place. We’ll explain exactly what professional liability insurance is, what it covers, how to get it, and how much it’ll cost. Continue reading to learn more.

What Is Professional Liability (E&O) Insurance?

Professional liability insurance protects small business owners from the cost of a lawsuit if you or an employee is negligent on the job. If your small business works in the service or advice-giving industry, a general liability policy is generally not enough coverage to handle potential lawsuit claims. In the event of a claim of negligence, misrepresentation, malpractice, or errors and omissions that resulted in harm, this policy will cover your defense.

Depending on the occupation, negligence could look like a misdiagnosis of a problem, failure to give proper instructions for a piece of equipment, or accidentally deleting important files. A professional liability policy is the only policy that truly protects from employee errors and mistakes of this nature.

What Professional Liability Insurance Covers

A professional liability (E&O) insurance policy will cover:

• Employee Negligence, Alleged Or Actual: These are the errors or omissions claims that people might bring against you or your business. If you overlook a crucial piece of paperwork, give bad advice, or miscommunicate and create something a client didn’t want, this policy was designed to cover those mistakes.
• Defense Costs: In the event that you or your business is sued for professional negligence, your policy will pay for your defense costs.
• Claims & Damages: And in the event that the claim has merit and the plaintiffs are awarded damages, your policy will pay those.
• Defamation, Libel, Or Slander: This policy will also cover the cost of a lawsuit related to libel (publishing untruths) or slander (saying untruths) about a client or a competitor.
• Copyright Infringement: Someone comes after you and says you stole their work? Professional liability insurance helps cover the costs of your defense.

What Professional Liability Insurance Doesn’t Cover

Indemnity policies have specific clauses that outline what is and isn’t covered. While professional liability is important to have, it won’t cover all your small business risks. A professional liability (E&O) insurance policy will not cover:

• Intentional Or Illegal Activities: Right. So…this policy doesn’t cover illegal acts or intentional acts of negligence on the part of your employees.
• Employee Injury Or Accident: If your employee is injured on the job, that injury is covered under worker’s compensation insurance, not professional liability insurance policy.
• Property Damage: Third-party property damage is covered under a general liability plan or a commercial property plan.
• False Advertising: A general liability policy would also be enough to cover your business against a false advertising claim.
• Bodily Injury To A Client: Once again, general liability, also called “slip and fall” insurance, is the coverage needed to protect yourself from a lawsuit if someone is injured on your property.
• Non-Work Related Accidents: You’re going to start to detect a theme. Yup, general liability is the policy that covers non-work related accidents.
• Data-Breach Protection: If you have access to private client information, protecting that information is crucial. Data-breach insurance or cyber insurance are the policies to look for to protect your business from irresponsibility with information.

Who Needs Professional Liability Insurance?

Most professionals or small business owners who work with clients could benefit from a professional liability policy. However, some occupations require a professional liability policy in order to practice (specifically lawyers and doctors).

Note: doctors may need additional malpractice insurance as well as a professional liability policy. Always talk to an insurance expert in your state about legal requirements.

If you aren’t sure a professional liability policy is the right fit for your business, ask yourself these questions:

• Do you give people advice?
• Do people make decisions based on your professional opinion?
• Could an employee make a clerical error that could cost your company money?
• Could a disgruntled client say you misdiagnosed a problem?
• Could someone else’s error cost you time and money and potential clients? 

If you can say ‘yes’ to any of them, consider adding professional liability coverage.

How Professional Liability Insurance Works

Professional liability insurance protects your small business from lawsuits and claims that say your business was negligent, didn’t deliver on its promises, made a work mistake, or gave bad advice. If someone sues you for any of the above reasons, then your insurance company will dispatch a team to your defense. Assuming you have picked an adequate amount of coverage needed for your business, the insurance company will also pay out any claims.

Types Of Professional Liability Insurance

There are two types of policies you can choose from when buying your professional liability insurance policy.

Occurrence Based
This policy protects you from a lawsuit if you had professional liability insurance at the time of the occurrence of the claim. Even if you do not currently have coverage, you’d be entitled to defense costs.

Claims-Made
This policy protects you from a lawsuit if you had professional liability insurance at the time of the occurrence of the claim and at the time when the lawsuit was filed. If you’ve let your insurance lapse, the lawsuit isn’t covered.

Additional Types Of Professional Liability Insurance

Liability insurance is the foundation for all insurance. Errors and Omissions is only one type of liability insurance you may purchase to offer coverage to your small business, and if it’s useful for you, by all means, buy it — but professional liability should be one aspect of your risk management plan. Odds are, you are going to need multiple insurance plans to safeguard your business.

While it isn’t fun and pretty, making a list of worst-case scenarios and detailing which insurance plan keeps you the most protected from those things is a good idea. Being uninsured is hard and difficult, but what’s even more difficult to find yourself underinsured? Thinking you’re protected when you’re not.

Depending on your company’s needs, it’s important to look into various other types of insurance policies in order to fully protect your small business. Don’t know where to start? Here is a list of other liability insurance options and how they might help.

How Much Does Professional Liability Cost?

As with all insurance policies, the cost is determined by your needs and the size of your business. The more clients you have, the more employees, the more opportunities for mistakes and the higher your policy will be.

The company Insureon researched professional liability costs across professions and discovered the median cost was $920 a year, according to their data, and over half of those businesses paid less than a $1000 a year. They also determined that the business industry and business size were the two most important factors for cost. There are certainly ways to lower the monthly cost as well. The biggest would be to raise the deductible on the policy (you’ll pay more only if you are sued; more money stays in your hands month to month).

Check prices on places like Insureon, Coverhound, or Coverwallet, which compare prices across a variety of insurance carriers. Talk to an insurance expert about ways to save by bundling this liability insurance with other policies as well.

How Much Professional Liability Coverage Do I Need?

When you purchase a professional liability policy, you will need to decide how much coverage to invest in for your company. Professional liability is sold in increments of one million dollars. According to legal websites, a lawsuit could cost anywhere between $5,000 to $50,000 to defend and that’s not including claims against a company which can start in the millions of dollars. (According to the Tech Insurance Blog, small business owners paid a total of over $35 billion dollars last year in out-of-pocket payments from lawsuits.)

Once you’ve decided how much coverage is enough (one million or more), your business can make decisions about deductibles and other cost factors.

Final Thoughts

Risk management is an important part of your small business. All of us who own small businesses know that we put our hearts and souls into the work we do. Mistakes can and will happen, and we can’t always count on the graciousness of others to work through those mistakes. Adding professional liability to a business owners policy or general liability policy is a good investment into your company.

When you purchase professional liability, you are not only protecting your assets, you’re protecting your name and your brand and the quality of the work you do. Once you’ve decided to make that investment, check out these simple steps to acquiring business insurance.

So, you just got asked to provide a loss run report? You’ve come to the right place.

You might be asked to show a loss run report when you apply for insurance or need to renew an insurance policy. Risk is an inherent part of a small business, and insurance companies need to know how financially risky your business is before they can give you an accurate quote on how much your policy should cost. A loss run reports is an insurer’s way of measuring that risk.

In this post, we’ll cover exactly what a loss run report is, when you need one, and how to improve your loss run report, so you can move on with the process of insuring your business.

What Is A Loss Run?

Loss runs are reports that show your company’s insurance claim history. In many ways, it’s like the credit score of the insurance world. Just a lender would look at a credit score to see what kind of lender you are approving your loan application, an insurance provider looks at your loss run report to help them know what kind of customer you’ll be.

The loss run shows how risky your business is for them by assessing the claims you’ve filed and the amount of money lost. If you are thinking of shopping around for insurance, you will want to provide a loss run report to insurance providers. Also, your current insurance provider might look at a loss run report to see if they need to raise your rates or offer you a different plan.

If you have had insurance coverage and haven’t had many claims, then a loss run report is your ticket to reduced insurance rates — it’s your golden ticket to say, “I’m a good business bet. I’m not too risky.” If this describes your business, you can take your loss run report and use it to negotiate a better insurance premium.

What Information Does A Loss Run Include?

A loss runs include the same data about your claim history. When you look at your loss run report it will contain the following information.

• Name of policy owner/the insured
• Policy number
• Date of each loss and claim
• Description of the claim
• Amounts paid to insured
• If the claim is still open or closed

Why Do I Need A Loss Run Report?

There are several reasons why you might need a loss run report.

1. You Want To Shop For A New Insurance Plan

The first and most common reason for a loss run is because you want to shop for insurance. Since a loss run report is your commercial insurance history, it demonstrates if you are a risky business or if you are a good investment, which is something potential insurance providers want to know. If you are shopping for insurance and have an insurance history, a loss run will often be required.

2. You Want To Lower Your Insurance Premiums

If you aren’t collecting data on business safety or shopping for new insurance, then you can use your loss run as a negotiating tool for lowering insurance premiums.

Think about your loss run report like your driving record. With car insurance, if you go so many years without any accidents, you are often rewarded with a discount. In a similar way, if you can show your current or potential insurance providers that your business has a track record of little or no claims, you’re proving that your business is safe and low-risk, which can often unlock better rates and premiums.

3. You Want To Assess Your Business’s Safety

You may personally want to see a loss run report if you are collecting independent data on various safety risks within departments. This can also show you which claims are still open.

If your business is risky and involves accidents and injuries, lawsuits and claims, a loss run is also a way to gather data about your business. Is there one department that is routinely injuring themselves more than another department? This kind of information can help you identify problem areas so you can implement better safety practices to reduce the chance of accident and injury claims.

What Types Of Business Insurance Require A Loss Run?

Loss run reports aren’t specific to one type of business insurance. Most insurance providers require a loss run report, regardless of which types of insurance they provide or what size of business they serve.

Where To Get A Loss Run Report

If you need to retrieve a loss run report, call your insurance account agent or agency and ask for them to send you a loss run report. You will need to tell them which business insurance accounts you’d like to receive loss run reports for, how many years of reporting you need, and the deadline for when you need the report.

Most states have laws that require an insurance company to respond to your request within 10 days. The speed of the report will depend largely on your insurance company.

How Insurance Companies Evaluate Loss Runs

As with all forms of insurance, the more claims you have, the higher your premiums may become. Every accident (at fault or not) that brings a claim to your insurance company’s attention will affect your rate and loss run report.

A company may look at your business and say it’s too risky. With a history of too many claims, lost lawsuits, and high-ticket payouts, your business doesn’t look too attractive to insurers.

Tips For Improving Your Claim History

A loss run is your claim history which means each time you need insurance to help cover a loss, the company makes a note of 1) What happened? 2) How much money it cost them.

Insurance companies are a business, too, and while our need for them may be imperative, they are not fundamentally altruistic in nature. If you become too expensive to insure, an insurance company may use a loss run to raise your rates or deny you additional coverage.

The best way to improve your claim history is to run a safe business that doesn’t encounter lawsuits. If your business is inherently risky, then maybe you should be paying those higher premiums. And while some businesses think potential claims might be out of their hands, that isn’t true.

There are many ways a business can make good safety choices to avoid claims. Train workers on how to properly use equipment and offer classes and incentives for staying knowledgable on the latest safety practices. Show proof of security system installation on your buildings, as well as proof of updating fixtures and following fire codes. Look for patterns in your loss run and determine what solutions could prevent those claims from happening in the future.

The biggest culprits for raising commercial premiums are worker injury and slip and fall lawsuits. While we may never be able to prevent all workplace injury, employing techniques to reduce worker injury and following proper safety protocols to protect people from falling will go a long way in protecting your loss run reports from pages of claims.

Final Thoughts

Loss runs are a tool. They help you and an insurance company determine what kind of coverage you might need.

Use this tool to your advantage: If you have a pristine claim history, use that as a bargaining chip and see if you can land yourself a competitive rate. If you don’t have a pristine claim history, can you determine areas of growth needed for your company? Ultimately, injuries and lawsuits are expensive and aren’t fun for anyone so finding ways to mitigate them or rewarding yourself for avoiding them is why a loss run will benefit you.