To know what insurance your business needs, consult your insurer. Any business owner should understand the value of business interruption and critical person insurance. Necessary person insurance will help you recover if you lose a key employee. Product liability insurance helps shield you from a variety of potential issues.
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Product liability insurance
If your company is considering purchasing product liability insurance, it’s essential to know what factors determine the cost of your policy. Size is one of the most significant factors, as large corporations tend to be more likely to be the target of legal action. Other factors include claims history, which means that companies with a long history of manufacturing will likely have lower rates. While these factors aren’t the only factors that affect the cost of your policy, they all contribute to its affordability.
Your business’s product liability insurance coverage may be a standalone policy or a part of your general liability insurance. First, however, you need to be aware of your policy’s deductibles and payment limits. Depending on the industry you operate in, this insurance can vary significantly. For example, your ADP general liability insurance policy may be sufficient if you don’t sell your product through a retail store. On the other hand, a standalone product liability policy is almost mandatory if your business sells high-risk products.
While most businesses focus on offering a tangible product, it isn’t uncommon for consumers to file lawsuits claiming property damage or bodily injury. For example, the McDonald’s “Hot Coffee” case became famous in the 1990s. Product liability insurance protects your business from this lawsuit by covering the cost of defending yourself and paying the settlements if they are awarded. However, a case can be expensive and can destroy your brand. Therefore, product liability insurance is an essential part of business and should be considered part of your business’s financial security plan.
Business interruption insurance
If your business is closed due to a fire or another disaster, you might consider purchasing a business interruption insurance policy. This type of insurance helps you recover the money you would have otherwise spent while operating your business. In some cases, this insurance will even pay for expenses while you are using it from a temporary location. It will cover things like payroll, employee wages, and even taxes. However, if your business cannot pay taxes, you may have to face penalties and late fees.
If you have multiple locations, the property risks will differ from a single place. Your insurance agent can help you determine what type of coverage you need. While you may not need the full range of a standard policy, you may want to consider adding the following coverages to your policy. It is also essential to know the limitations of the coverage you have. A lower limit means less protection in a catastrophe, and you may have to make adjustments to the policy limits.
Business interruption insurance policy limits determine how much you can claim. Therefore, before purchasing a policy, knowing how much you can expect to lose if your business is shut down for a few days is essential. For example, a loss in revenue due to a power outage may be covered under your policy.
Key person insurance
If a person is vital to the success of a business, it’s essential to have a policy to protect the key people involved. This may mean a sole proprietor, a C-suite executive, or a partner for a small business. But larger companies may need the insurance to replace the key person’s sales and provide a financial cushion while searching for a replacement. And, of course, if you’re the owner, you should consider critical person insurance for your business.
Critical person insurance can vary widely, so it’s essential to understand how much it will cost. Consider the age, health, and occupation of the key person you’d like to protect. The insurance amount you’ll need depends on how important this person is to the business. A key person’s insurance will replace the owner’s salary. So, be sure to look at this factor when determining the amount of coverage you need.
In general, a key person’s compensation is often five to seven times the compensation they’ll receive. For example, a CEO who earns a $250,000 salary can make $360,000 in gross compensation. Therefore, a key person’s life insurance policy should cover at least five to ten times the individual’s compensation. Depending on your needs, you can also choose from term or permanent coverage.
Read more: Is Your Health Insurance Cover Enough to Protect You Against Critical Illness?
