Why the Right Business Insurance is Critical – A Lawyers Perspective

Larry DonahueAuto Insurance, Claims Process, General Liability, Home Owners Insurance, Product Liability, Professional Liability, Workers Compensation

The right business insurance is not just critical for your business.  In some instances, it’s legally required.

The Right Business Insurance is Critical to Your Company

If you are conducting business, no matter what type of business you have or what you’re doing, you owe it to yourself to make sure you’re carrying the right business insurance.  Aside from potentially being legally required, business insurance (for a surprisingly affordable fee) provides three very important things:

  • First, the right business insurance provides peace-of-mind, which provides subconscious moral support to be aggressive and take risks.  This is important for smart, small, growing companies.
  • Second, the right business insurance will defend you in case a lawyer comes calling.  This is critical, because even if you’re “in the right” and did nothing wrong, a lawyer can still sue your business and you will have to spend (potentially) tens-of-thousands trying to defend yourself and your business.  If you have the right insurance policy, you won’t have to spend anything fighting off lawsuits.
  • Third, the right business insurance will take care of you and your business, in those rare instances where your business did in fact cause injury, harm or otherwise created an opportunity for someone to claim they’ve been harmed.

Legal Requirements for the Right Business Insurance

Every state has its own legal requirements about insurance, such as minimums triggering certain types of insurance.  However, all states have some sort of requirements for:

  • Workman’s Comp.  Some states require Workman’s Comp, no matter what size your company.  Others will have a minimum number of employees before being required.  What most business leader’s don’t know, is that owners are included in the employee count.  So, for example, New Mexico requires that any company with “three or more workers” have coverage.  Workers aren’t just W2 employees, and can include 1099 contractors.  Company owners are not exempt.

Some states have some sort of requirements for:

  • General Liability (or GL).  General liability is like an “umbrella policy” for businesses, and cover basic liability issues, such as a customer falling in the store.
  • Auto Casualty.  If you have employees or vendors driving on behalf of your company, you may be legally required to have the proper insurance for this.  What you SHOULD NOT DO, is depend on the personal auto policies of your employees or vendors – many such policies will have exclusions for operating the vehicle for business or commercial purposes.
  • Property Casualty.  If you lease or own facilities or a building, you will want insurance to cover the property.  Even if you lease, do not expect to be covered by your landlord’s policy (even if they verbally tell you you’re covered) – you need to specifically refer to the lease.
  • Professional Liability.  Many professions, from lawyers, doctors, accountants, to plumbers, electricians and more, may need some form of professional liability insurance.  Some states will require it, depending on the profession.

Other Insurance Issues

The above-mentioned forms of insurance are far from all that you may need as a business.

For example, there are federal requirements for health insurance for employees, after your company reaches a certain number of employees.  As another example, if you’re doing business on the Internet and taking credit card information to facilitate sales, you should look into a cyber policy, which will help cover any losses associated with data loss or theft.

If you have important people in your company (i.e. a key partner, for example), you may want to consider keyman or key-life insurance for such important people.  It’s a surprisingly affordable form of life insurance paid to the company, should something happen to such an individual.

Depending on the needs of your business, the owners, and the employees, there are a wide-variety of insurance policies that are not only affordable, but worthwhile.

The Lawyer’s Perspective

The proper insurance coverage by the right business insurance usually defines the long-term viability of a company.  In other words, those companies with the right business insurance will usually succeed and become valuable assets to their owners in the long-term, and those companies who don’t have the right business insurance end up failing and going bankrupt, as fate inevitably finds them staring at an expensive fight they cannot afford.

As an attorney, insurance plays a huge part of any potential dispute.  If one of our clients is being forced to defend themselves and they have insurance, the insurance company will usually take over defense – and our client isn’t paying anything (except any deductibles after the issue has been negotiated and settled).

If one of our clients is a plaintiff, wanting to sue another company, and the other company does not have insurance, then that company will try to settle over going to court – usually because they cannot afford to pay lawyers tens-of-thousands of dollars to fight a lawsuit they will probably lose.  In other words, the lack of insurance gives the other party a huge advantage in the tactics of fighting a lawsuit.

If you own a business, and you don’t have the proper coverage – or you’re not sure what the proper coverage is – you owe it to yourself, your company, your family and your employees to figure out what the proper coverage is, and get that coverage.

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