There are two types of business insurance
, property insurance and liability insurance
. Property insurance covers the tangible loss or damage to the insured property. Whereas, business liability insurance provides cover for a legal defence and damages from any court judgment or settlement.
However, there are many different types of liability insurance available to businesses. Below we take a closer look at each of the protections available and offer a further understanding of the concepts that underpin liability insurance.
What is business liability insurance?
Business liability insurance encompasses a number of different covers that offers 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.
What liability insurance should we consider?
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How can business liability insurance offer protection?
Employers liability insurance
protects against claims arising from injury or illness of your employees. Offering protection for legal costs and damages.
Public liability insurance
protects against claims arising from injury or property damage of persons other than your employees. Offering protection for legal costs and damages.
Product liability insurance
protects against claims arising from injury or property damage as a result of a fault with a product you have provided. Offering protection for legal costs and damages.
Professional liability insurance
protects against the failure to exercise reasonable skill and care in provision of professional or advisory services. Offering protection for legal costs and damages.
Management liability insurance
is a package policy designed to protect small to medium sized businesses, with D&O liability insurance
offered as the main cover. Offering protection for legal costs and damages.
Trustee liability insurance
protects individuals from claims and investigations, which may arise while acting in their capacity on behalf of an organisation. Offering protection for legal costs and damages.
Employment practice liability insurance
potects against claims arising from a wide range of employment disputes. Offering protection for legal costs and damages.
Contract works liability insurance
protects the work in progress on a construction site in the event damage before responsibility has been handed to the principal. Offering protection for legal costs and damages.
What is the principle of indemnification?
Indemnification is one of the core principles of liability 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 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 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 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 liability insurance policies.
How to compare business liability insurance quotes?
As a specialist insurance broker
, we have the capacity to identify a range of business liability insurance quotes to meet your needs.
Whether you operate a small business or medium sized business (turnover less than £100m), we can identify and access insurers that can provide the cover you require to protect your business.
Compare business liability insurance
quotes from the wholesale market by completing our online application
This guide is for information purposes and based on sources which we believe are reliable, the general risk management and insurance information is not intended to be taken as advice with respect to any individual circumstance and cannot be relied upon as such.