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Why small business owners should be insured against liability

Article provided by Auto & General

Every year, thousands of lawsuits are filed against businesses for numerous reasons. These lawsuits have the potential to deplete years’ worth of savings. One lawsuit may be all it takes to send a business into liquidation. Having liability insurance not only protects small business owners from certain lawsuits, but provides other benefits like covering the cost to repair damaged equipment and protecting information stored on computer systems.

Lawsuits and liability insurance

No matter how well a business is run, accidents happen and customers could file lawsuits against the business as a result. It is increasingly common for negligence lawsuits to be filed in South Africa and because more customers are deciding to pursue these in court, liability insurance has become essential for small businesses. Auto & General’s Liability Insurance Policy provides small business owners with legal counsel in the event that a negligence claim is made against the business which means that the owner won’t need to face the trauma of litigation on their own but can rely on the expertise of professionals who will navigate the process with them.

Considering the amount of cover you need

This depends largely on the type of business and the amount and severity of liability they are exposed to. While it is generally a good idea to have broad insurance coverage to protect one’s business from lawsuits, it is also wise to consider the type of business that one has. Considering the type of business that one has will also dictate the total amount of insurance that one should take out. For example, someone who owns a restaurant would likely need more cover than someone who operates a small business from home. Due to the number of patrons that pass through a restaurant’s doors, the chance of a slip and fall case or another type of negligence case is more likely.

Know the maximum amount paid

Estimating the maximum amount a business could be sued for in a court of law can be very difficult but if we consider that an average hourly fee for an attorney is around R 3,500.00 these costs can mount up very quickly indeed. The complexity of the case will determine the number of hours the attorney will need to spend on the matter. Assuming 25 hours totals R 87,500.00 and then one should factor in the cost of medical expenses for injury or costs of repair for damage.  It would be unwise to consider a low limit for this exposure.

Asking for advice

If a business owner has questions regarding liability insurance, then they should meet with an insurance broker or contact an Insurer to discuss their options. A broker or alternatively the insurer, can fully explain the benefits of liability insurance and how it can keep a business owner out of the court room as well as review any policies that a small business owner may already have.

For more information on your commercial insurance needs SMS quote to 45577 or click here. Terms and Conditions apply.

This article has been written by Ken van Sweeden at Auto & General Insurance Company Limited, an authorised financial services provider (FSP number 16354).

Auto & General are proud Partners of the NSBC.