How to Insure your Business from Lawsuits

Your company strives to offer well made products or experienced services, whichever the case may be. You work hard to make sure that all safety practices and equipment are in place. You shovel and salt your walk way during the winter, and always put out the wet floor signs when needed. You think that you have all of your bases covered, and yet, you have just been served with papers.

You are being sued, and wonder if there was a way to have prevented this from happening in the first place.

Yes, this is a litigious society we live in, and while you cannot completely eliminate the threat of a suit, you can greatly reduce the risk. First, make sure that your liability insurance adequately covers your business’ types of services and equipment. This insurance will cover a loss resulting from faulty installation or a defective product. Make sure that the coverage is enough to cover more than one instance, especially if it is a product that has gone wrong.

If you have vehicles in your line of work, then you will also need a separate commercial auto insurance policy to cover accidents which occur during their use. If your driver pulls out of your parking lot and causes a four car pile up, will your policy protect you from an onslaught of lawsuits? The bigger your vehicles, or the more vehicles that you have, the more insurance that you will need. When shopping for your policy, do not simply figure the cost of replacement, you must also consider the possible liability if there is an accident with loss to the other driver.

If your company must be closed for a lengthy period, or folds completely, will you then be faced with lawsuits from investors and displaced former employees? A policy called a “business interruption policy” is a good investment to consider. It covers expenses during a stoppage of service or the cost of a temporary relocation if that becomes a necessary thing as well. This policy, which can be added to an existing policy as a rider, will usually cover employee payroll for a short period, during which time you can assess your options and your risks of lawsuits.

If yours is a small company, and you have been a good employer up to this point, your employees are less likely to sue. Of course, if you have been an old bear, then a sudden closing will be more likely to be viewed with resentment and rancor.

Discuss your insurance needs with your insurance agent or financial planner. Use online tools that will gauge your risks based on type and size of company, so that you have a basic idea of what you will be needing before hand. Know that certain companies have more inherent risks involved, and therefore will need more insurance.

No matter what the size or the type of business, insurance should be a priority. It makes no sense to cover for everything else, only to lose it all with a single lawsuit.

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