Picture this. You are a manufacturer of earphones. One of the batches that you manufactured has a defect, resulting in an ear injury to a few customers, who file a product liability claim against your company. What do you do?
If you have liability insurance, then this is what comes next: The insurance carrier provides the necessary cover for the legal costs and damages, and/or compensation you may need to pay to settle the case for your company as per the court’s judgement (subject to the applicable limit), and with the Insurer’s prior approval, even out of court settlements can be carried out.
Now, if you don’t have liability insurance, here’s what comes next: You would have to pay the legal fees and all associated costs, leaving you with a sinking feeling and a falling bottom line.
Let’s take another scenario. You own a factory and one of your workers slips and falls, sustaining a head injury. If you don’t have an employer’s liability policy or a workers’ compensation policy, you’re going to be facing a hard time in court, and possible damage to your reputation and your assets.
Something as simple as employer’s liability or workers’ compensation could have protected your business against liabilities arising from injuries to, or the death of, an employee.
Liability insurance is extremely important in the business world as it protects policyholders from financial losses resulting from lawsuits or third-party claims. Liability insurance is an umbrella protecting you from third-party claims arising out of property damage, bodily injury, and personal injury, and aiding you with legal defense costs, settlements, and judgments.
Also, as per the New Consumer Protection Act 2019, which became effective in 2020, businesses are liable for Product Liability arising out of defective products and/or liability due to a deficiency in professional services.
In short, liability insurance is a necessity for a business, not a luxury.
It can be customized to meet the needs of your business, its size, and the risks involved. There are several types of liability insurance such as general, professional, product, and cyber liability insurance.
- Commercial General – including Product Liability and General Liability Insurance, for example, is for businesses that manufacture products for sale on the general market and protects against lawsuits arising from injury or death caused by the products.
- Professional Indemnity Insurance provides coverage to a business against claims arising out of any act, error, or omission in providing its Professional Services.
- Cyber Liability Insurance protects you from first-party and third-party losses due to hacking or cyber attacks on your business.
- Directors & Officers Liability Insurance protects the Directors and Officers of a business from personal liability for any claim arising out of their supervisory or managerial roles.
Here are three reasons why your business needs liability insurance.
1. To protect your Balance Sheet
Imagine the out-of-pocket expenses you will have to face in the event of a claims suit if you don’t have insurance — legal fees, damages, and so, which can be devastating to your bottom line. Now, with liability insurance, you can focus on running your business without worrying about potential legal issues.
2. To add to your Business Stability
Having liability insurance reassures clients and customers that your business is financially stable. It builds faith in your company. And gives both you and your clients peace of mind knowing that your business is protected in the event of a lawsuit.
3. To safeguard the Directors and Officers
The Directors and Officers work in the best interest of the Company – but what if there is a claim arising on them due to which their personal assets get attached? A D&O policy protects them in such claims for damages and defence costs and gives them peace of mind as they perform their roles.
4. To meet your Legal Requirements
In some cases, liability insurance is required by law. For example, if you are running a factory with hazardous substances, you may be required to have Public Liability Act insurance, which helps cover third-party bodily injury or property damage claims due to your operations.
Here’s what to look for before you zero in on your liability insurance
- Determine the risks and damages in the event of an unfortunate event
- Understand your budget and compare the business and the policy
At Odin, we have experts who can help you with finding liability coverage that suits your business needs. Odin offers insurance support from start to finish to ensure well-planned coverage at optimised costs. We have over 500 clients across 30 industry sectors, so you can be sure that every recommendation we make is backed by extensive experience and in-depth expert knowledge.