Benefits

• By purchasing business liability insurance, companies transfer their financial responsibility for paying claims to their insurers. All award amounts or settlements from claims made against the company are covered by the insurers up to the policies' coverage limits. Insureds also receive financial assistance to pay for legal aid. Business liability policies pay out benefits to replace incomes that are lost while in litigation.
  
  

What Does it Cover

• Business liability insurance plans cover several risks that would cause policy holders to pay money. Insureds are protected against lawsuits stemming from claims of negligence that cause injuries to third parties or damages to properties owned by them. These policies cover the injured parties' medical expenses as well. Business liability insurance plans also cover the actions of employees and independent contractors working on the companies' behalf.
  
  

Considerations

• Insurers sell business liability as a stand-alone plan or combine it with other coverages to form Business Owners Policies (BOPs). This type of policy packages general liability along with property liability to create an umbrella of coverage for businesses at reasonable rates. However, business liability insurance plans bought separately or bundled together as BOPs do not cover all risks. For example, these policies do not cover recommendations or advice given to clients by professionals such as accountants and financial advisers that cause financial losses. To cover these risks, businesses would have to purchase errors and omissions (E&O) insurance.
  
  

Warning

• When purchasing business liability insurance policies, it is important for companies to buy enough coverage to pay for claims. If not, they are responsible for any amounts that exceed the coverage limits. One way for policy owners to prevent this from happening is to reevaluate their policies often to make sure their coverage amounts are in line with their business industries' averages. Also, not having this protection exposes businesses to paying for their own legal defense. This can be costly even if the company wins in court as it may have to shell out thousands of dollars and lose business in the process.