Liability Insurances Hong Kong, business liability insurance, tailor made insurance

Starting a business in this generation is always an outstanding achievement and has its challenges. Running a company may be demanding but rewarding and can change lives. Every business owner and CEO  want their business to succeed and grow further.

When one starts a business, they are automatically liable for many duties and responsibilities. Some liability risks include internal risks, including threats from third parties, which are difficult to manage.

Liability risks could include a product or service negatively affecting a customer, client or shareholder. When a person feels they have been harmed or betrayed by a business, they have the right to take action, even if it may not be the business’s fault. Unfortunately, such actions can result in the company suffering financial loss and reputation damage.

These risks are precisely why many companies purchase a range of liability insurance. Liability insurance will help the business face these risks and reduce the negative impact.

What Are Liability Insurances?

Liability insurance is crucial for any business now. Unfortunately, things don’t always go as planned, and unpredictable events can lead to lawsuits. Liability insurances protect the business against claims resulting from bodily injuries, property damage or financial damage. In addition, liability insurances ensure that the company is not ruined due to a mistake and a surprising lawsuit.

The different liability insurances include professional indemnity (PI) insurance, director and officer (D&O) insurance, product liability insurance and public liability insurance. Each liability insurance has its unique purpose and specific cover.

The 4 Types Of Liability Insurances

Professional Indemnity Insurance (PI)

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To be human is to make mistakes- Employees and professionals are not perfect; mistakes in a workplace are common and unintentional.

However, some mistakes can be considered negligence and are taken more seriously. Especially when the professional error leads to financial harm, injuries or property damage. A client can sue the professional and the business for negligence, leading to costly lawsuits and huge reputation damage.

For example, There have been many cases where accountants have been sued for not providing information in writing, resulting in clients’ financial damage. It is a mistake that can cost the professional a lot of financial loss and reputation damage.

In such cases, professionals and businesses will be thankful they purchased professional indemnity (PI) insurance. Professional indemnity insurance, or professional liability insurance, provides coverage for professionals and companies to protect against negligence claims from clients or customers. PI insurance covers negligence, copyright infringement, injury, or damage due to professional advice.

In addition, the insurance will pay for any damages caused, legal fees and settlement costs. PI insurance can save a business or professional from significant financial and reputation loss.

Director and Officer Insurance (D&O)

As a CEO, director or manager, you are directly and personally liable for any decision you take for the company. These roles are directors and officers, leading the business to grow and succeed. The roles come with great responsibility and duty to the company.

The directors and officers have a range of duties to their employees, shareholders, and even the government- known as Fiduciary Duty. If a manager or director breaks or disobeys their commitments- shareholders and employees can sue the responsible manager or director. A lawsuit can affect the person and the business, causing a negative reputation and income loss. It may not be the director/officer’s fault or an accident, but they will still be liable.

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A breach occurs when a director or officer decides to act for their own personal benefit instead of in the company’s best interest. For example, a manager may share company secrets with a family member, who uses them to open their own company. As a result, the shareholders will sue the manager for breaking the duty of loyalty.

In addition, there are various cases where the director or manager is sued by their shareholder or employees for not obeying their commitment to the company.

In such situations, Directors and Officers Liability (D&O) insurance protects liabilities for the management staff. D&O insurance will provide the business with legal funds to defend its management staff, including compensation and settlement costs. Therefore, any company, small or big, must purchase D&O insurance to protect managers, HR and CEOs from these risks and any unforeseen mistakes.

Product Liability Insurance

The product industry comprises countless businesses involved in designing, manufacturing, and distributing. Products include anything sold physically, including food, medicines, toys, etc. A company involved in any product stage has to be careful of the risks that follow.

The businesses involved are liable if the product has defects. Hence, It could be a design defect, manufacturing defect or failure to warn. When a product does lead to harm or damage, the third party has the right to sue the responsible party for compensation and settlements.

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For example, a food product may get customers sick due to the distributor not storing it correctly or specific ingredients. The third party can sue the brand and claim compensation for their illness.

Product liability insurance covers most claims linked to product defects. Insurance is essential for companies designing, manufacturing, or selling a product. The insurance will cover costs related to product defect claims. Product liability insurance will cover compensation to the third party and settlement costs.

It is essential to understand that product liability insurance won’t cover product recall, and policyholders can add an extension of product recall insurance to cover recall costs.

Public Liability Insurance

Many businesses provide their product or services in a specific store/site. A company allowing third-party members to walk in and out is liable for their safety when on business premises. A third party can sue a business for bodily injuries or property damage on business premises or due to company activities.

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Every company faces public liability risks; even if you and your work don’t invite third-party members on-site, there is still a chance of injuring the public in some way. For example, employees may be on the way to an important meeting off-site. On the way to the meeting, the employee accidently runs into a person, resulting in them falling. The third party can sue the employee for bodily injury. Even though it’s off-site, the business is liable for its employee’s actions during working hours/activities.

Public Liability insurance protects a business if a third party (a member of the public) sues the firm, alleging that the company caused them some bodily injury or property damage. Public liability will cover all legal costs, bodily injury, property damage, settlement and compensation expenses. In addition, the insurance allows the business to run normally and prevents financial loss and brand damage.

Why Is It Important to Be Protected By The Right Liability Insurance?

The range of liability insurance is crucial to protect against the various possible claims. Unwanted claims are unpredictable; a small mistake could lead to a significant financial loss and ruin a business. These insurances will cover these risks and ensure the company can recover from the impact.

As you can tell, each liability insurance covers different possible risks. However, every business should consider at least three of the four types of insurance to be completely safe, whether small or big. For example, F&B companies may only need D&O, product liability and public liability insurance. A finance office-run business would also need PI, D&O and public liability.

The right combination of liability insurance will protect a business from possible risks and reduce financial loss if a business faces a liability claim.

It’s time to grow your business to the next level and protect the company from surprising claims with liability insurance.

 

To Learn More about liability insurance and get the best protection for your business and employees, contact Red Asia Insurance.