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How General Liability Insurance Protects You

As a financial planner and CPA it is important to make sure our clients are protected from lawsuits. When in business, it is critical to protect against the liability you have, based on the products and services you sell, and the vehicles you use. Liability insurance is the easiest way to ensure that you have the needed protection for your business. It can be designed to provide specific coverage for specific exposures a company might face. This coverage can be provided at reasonable rates and at a fraction of what it might cost should you be sued. Traditionally, business firms insure their liability exposures using Commercial General Liability policies or business owner’s policies.

As a CPA and Financial planner, I have recommended forming an LLC or incorporation in addition to liability insurance for asset protection.

No matter how careful you think you are, you could be sued successfully for accidents resulting from something as simple as the carelessness of an employee or customer. General liability insurance is your last line of defense against devastating claims for events or actions over which you may not have control of. General liability insurance insures a business against accidents and injury that might happen on its premises, as well as exposures related to its products.

Exposure to liability claims may result from either the actions you choose to take, or those you choose not to take that is considered prudent under the circumstances.

General liability insurance provides liability insurance for the cost of defending lawsuits stemming from accidents that cause bodily injury, property damage, and claims such as libel, slander and false advertising.

There are three areas of exposures:

  1. Direct liability– This arises out of the firm’s own actions
  2. Vicarious Liability– This is considered an indirect liability which most often arises from hiring independent contractors. The plaintiff would claim that you were negligent in hiring, informing or supervising the contractor.
  3. Contractual Liability-This arises if a firm accepts by contract a liability it otherwise would not have had but for the fact it agreed to take on that responsibility.

Additional Liability insurance and provisions

Long-tail claims– Insurers call claims filed many years after the alleged injury took place. This is usually used in product liability cases or construction contractors.

Umbrella policies– Commercial umbrella policies can be purchased which provides coverage for excessive claims above your current policy and a more comprehensive coverage then your current policy. The umbrella policy becomes the underlying coverage after your general liability policy is exhausted. There is no standard form of commercial umbrella liability insurance and many policies have substantial differences.

Environmental Impairment liability– to provide protection for claims against individuals and organizations whose actions damage the environment.

Professional Liability Insurance– This is sometimes called malpractice insurance or errors and omissions coverage. Such insurance typically commits an insurer to pay all sums subject to policy limitations, that the insured becomes legally obligated to pay as damages resulting from providing or failing to provide professional services  or negligence. Errors and omissions insurance protects your firm from claims if your client holds you responsible for errors, or the failure of your work to perform as promised in your contract.

Director and officer’s  liability- covers Directors of corporations and other organizations.

Employment practices liability– This arises from hiring, terminating and supervising personnel.

If you need any help in this area of incorporating or finding general liability insurance please call RJR Financial Firm for a quote or service in forming a corporation.