Business insurance definitions
Business insurance from get indemnity™ includes a range of covers designed to offer companies protection against financial losses in the event of an unforeseen event. Also known as commercial insurance or company insurance.
Business insurance definitions, exclusions and insuring clauses will vary from product to product. Therefore it is valuable to discuss your requirements with an insurance broker to ensure the solutions meet your needs.
Below we provide an insight into purchasing insurance for business and offer general advice to UK companies. Your business activities, size and risk appetite are just some of the factors that will indicate what business insurance best meets your needs.
What is business liability insurance?
Business liability insurance encompasses a number of different covers that can offer legal costs in defending allegations, and protects against damages resulting from any judgment, award or settlement.
Liability insurance definitions can vary, therfore it is worth considering the terms and features to understand what cover best meets your demands and needs.
The most commonly purchased business liability covers include employers liability, public liability and professional indemnity insurance
, each offering financial protection from demands for compensation whereby you may be legally liable.
What is business property insurance?
Business property insurance encompasses a number of different covers that can offer cover for the loss, damage or destruction of insured property from a range of different perils.
Property insurance definitions can vary, it is worth considering whether the cover is offered on an 'all risks' basis or named insured perils which provides a more restrictive cover.
Business property insurance covers are commonly purchased under office insurance policies for professionals, contractors all risk insurance
for construction firms, or commercial combined insurance for a range of business activities.
Underlying principals of business insurance:
Liability insurance for business can be confusing, below we've identifed some key principles that underpin business insurance:
What is indemnification?
Indemnification is one of the core principles of business insurance:
The insured should not profit from a loss or damage but should be returned to the same financial position before the loss or damage occurred.
The insured cannot profiteer and recover more than his or her actual loss. There are however exceptions to this rule, such as personal accident and life insurance policies where the amount is paid on occurrence of accident or death.
What are long-tail liabilities?
Civil actions can take years for a claim to be made, the statute of limitations for a tort (civil wrongdoing) is six years. Long-tail business liability means there is potential for a claim to be made against you for an extended period after the event occurred.
In addition, it can also take an extended period to settle the claim. This potential for a long settlement period means liability insurance claims are often called long-tail liabilities.
What are limits of liability?
The limit of liability is the maximum amount for which an insurer may make payment under the policy.
It is worth acknowledging that limits of liability can work on a different basis. For example, some business liability insurance policies work on an 'aggregate' basis (the total amount payable), or on a 'any once claim' basis (the total amount payable for claims arising from any single event).
What are defence costs?
It is common for defence costs to represent a higher amount than the settlement or damages awarded under a business liability insurance policy. Consideration should therefore be given to the total limit of liability your business requires.
For example, it is recognised that defence costs for products such as D&O Insurance
can typically amount to over 60% of the total cost of the claim.
What is the duty to defend?
A duty to defend provision provides the right to select legal counsel and control the defence of a claim.
In some business liability insurance policies (i.e. EPL Insurance) the insurers will want to protect their interests in managing the cost of your claim. They will have a panel of law firms ready to respond to defend claims made against you.
Whereas, with some insurance policies (i.e. D&O Insurance) it is the duty of each insured person to select legal counsel and control the defence of a claim. The insurer will reserve the right to be consulted prior to any spend against the policy.
At get indemnity™ we can provide guidance on your rights and responsibilities under your business insurance policies.