You would want to protect your business in the most effective possible way with the use of liability insurance. For this, you need to make several important choices. One of them is how much cover to buy. The following information and advice will help you with making this major decision.
Cover Amount Basics
You should have a clear idea of the limits set on the liability insurance amount. There is a typically limit per occurrence. It sets the maximum amount which can be used for settling the claim or claims related to a single accident. There is also an aggregate or period limit. It defines the maximum amount which the policy can pay out during the respective insurance period, which is typically one year.
Additionally, you must check whether the cost of the legal assistance which you will get as part of the policy is wrapped into the total cover amount. If this is the case, you will have less money available for settling claims. You must take this limitation into account, if it is applicable to your policy.
The liability insurance amount which you buy must correspond to the risk of a liability claim against your company. In order to assess the risk level, you need to take into account the nature of your product or service, the clients which you have and the claim statistics for your industry as a whole. If you sell cutting tools for garden maintenance or provide financial advisory services, for example, you face a higher risk. Similarly, if you work with clients such as children or seniors, the likelihood of an accident is also greater. At the same time, you can take measures for risk reduction such as providing safety training to employees.
Revenue and Wealth Assessment
When a claim is made, the claimant always takes into account the ability of the defendant to pay in order to determine the size of the demanded compensation. Wealthier companies typically have to pay more. That is why it is essential for your liability cover amount to match the revenue and wealth of your company. In this way, you will get the most effective protection.
You should definitely set up a budget to have a precise idea of how much you can spend on a liability policy. You should try to get the maximum possible cover amount for the money which you can spend through comparison shopping. You have to confirm that you will not remain underinsured.
Last, but not least, you should definitely consider using expert help when determining the optimal liability insurance amount for your business.