7 Reasons Why Liability Insurance Is Required by Every Business


7 Reasons Why Liability Insurance Is Required by Every Business
Proper insurance protection is required by business owners. The main form of business policy is the CGL (Commercial General Liability) or general liability insurance. There are various claims like property damage, injury and advertising claims that are covered under this coverage. In the following paragraphs the top seven reasons will be discussed why general liability insurance is needed by all businesses.

1. Risk Management
Businesses have to be prepared for any eventuality. It requires long-term approach from the business owners to be prepared for adverse situations. General liability insurance is referred as risk financing in some of the business economics. It involves keeping the funds in the reserve to take care of those eventualities that business might suffer in future.

2. Individual Protection
In the US almost 75% of all businesses are either sole proprietorship or in partnership. Business liability and personal liability are the same for these companies. Other businesses are referred as LLCs. There is a certain kind of myth that owners are protected by LLC. However, most of the times LLC requires owners to guarantee loans personally which makes any protection almost invalid.

3. Lost Income and Expenses
Insurance means being protected against future adversities. In case of sudden financial liabilities cropping up the business can come to a standstill. It will result in lost income plus the expenses incurred in taking care of claims. These losses can be safeguarded with a CGL policy.

4. Regulations, Laws and Local Taxes
Liability insurance for the business is not required by state or federal laws, unlike the automobile liability insurance. However, there are many regulations and laws at local level that require businesses to be properly covered with certain insurance policies. Depending on the type of coverage in possession companies are offered different types of tax advantages.

5. Employees
A business not only has to protect its employees but also be protected from its employees. The law holds businesses responsible for the actions taken by employees while representing their company.

6. Hired and Non-Owned Auto
For vehicle usage general liability insurance is needed by most states. In such cases where non-owned and hired automobiles are being used by the company the CGL policies provide the features that allow a business to conform to these laws.

7. Savings
The problem is most SBOs consider insurance as an expense. However it needs to be considered as an investment. When the business faces adversities, most of the financial liabilities and expenses will be taken care of by these insurance policies.

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