What is liability insurance and how can it help your business?

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By Grant Gilmour

Facts:

Liability insurance is insurance designed to protect your business in the event of a lawsuit.  Liability insurance protects your business if your company is found legally liable for injuries or property damaged as a result of your company’s services, employees or products.

 

Discussion:

An employee, a customer’s employee or even the general public may be injured by a product you have made or sold or by a service someone connected to your company has provided.  This may result in legal action against your company by the injured party for losses and damages.  Liability insurance is designed to protect your business against lawsuits of this type.

 

As with other types of insurance, liability insurance comes in the form of premiums that vary depending on how much coverage you wish to obtain.  The cost of not having liability insurance can be substantial.  Even if you are found not at fault, the legal defense costs alone can be substantial to defend your company in the event of a lawsuit.  In addition to legal fees, a lawsuit may result in balance owing for damages or at the very least a settlement amount.  Lawsuits such as this can wipe out your savings, harm your company’s reputation, erode your goodwill and even bankrupt your business.  In addition, the fact that your business may be incorporated will not always protect you from a personal lawsuit as the director.

 

A liability insurance policy can be designed to assist and protect you in the event of any of these situations.  In the event of a lawsuit covered by your insurance, your liability insurance policy can be used to provide assistance such as legal defense and funds for damages and settlement.  Business liability insurance is a cost effective way to protect your business and the added benefit is this type of insurance is 100% deductible for corporate tax purposes.

 

Recommendation:

For more information on liability insurance and how it can protect your company, please contact Gilmour Knotts Chartered Accountants.

 

Grant Gilmour B.Sc Hons, MBA, CPA, CA, CICA-ITC  is the International Tax Partner of Gilmour Knotts Chartered Accountant. To connect with Grant visit:   www.gilmour.ca. Email: grantg@gilmourknotts.com