What Does Liability Mean In Business?
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Running your own business comes with many perks, however, there are drawbacks of being a small business owner, one of which is liability.
Liability in your business not only represents your financial obligations, but the term can also be used to highlight different risks in your business. Comprehending what is included in the term, the difference between personal indemnity liability and public liability and how to minimize risks are key factors when it comes to liability in your business.
What is the Definition of Liability?
The term liability takes on a few different meanings. The most common interpretation of liability is in the financial accounting realm. Liabilities represent amount your business owes to third parties, such as lenders and creditors. On the other hand, liability can also represent risks in your business.
Common business liability risks include workplace injuries, employment discrimination, professional liability, and data breaches. If any of these scenarios occur, you could be on the hook for paying out damages to third parties.
In addition, if you aren’t properly covered for personal property liabilities, you run the risk of having to pay for any repairs out of pocket, which can add up quickly. The best thing to do if you're unsure what liability is referring to when presented on documentation (such as in your insurance contract) is to read the definitions often found in the policy wording document that is given to you along with the details of your policy.
What is the Difference Between Personal Indemnity Liability and Public Liability?
Personal indemnity liability and public liability encompass two different areas of your business. Public liability is aimed at injuries or damages to members of the public while personal indemnity deals with claims for damages resulting from your professional judgment mistakes. Small businesses in the allied health and healthcare industries should have personal indemnity liability protection because they are frequently giving clients their professional opinion in exchange for a fee. However, all businesses, including healthcare and contractors, should have public liability coverage since they are interacting with members of the public on a daily basis.
How Can I Reduce the Liability Risk in My Business?
The top way to reduce liability risk in your business is to have the proper insurance coverage for both personal indemnity and public liabilities. Retaining the proper insurance coverage is critical if you do get sued because your insurance carrier may cover most, if not all of the damages owed to a third party (up to your limit).
In addition, some customers require that you have public liability insurance when you are in a high-risk business. Contractors and healthcare businesses retain a high liability risk because of the nature of their business, leading to obtaining the right insurance coverage a top priority.
Understanding how liability can impact your business is the first step in properly insuring your business in case any lawsuit is brought against you. Finding the right insurance carrier is a difficult task, however, upcover provides you an easy way to get an instant quote online! Simply enter your occupation and expected revenue to receive an estimate on your policy in seconds. Check it out for yourself today!