4 Ways Lawsuit Insurance Can Save Your Business
Are you a small business owner? If yes, the numbers 36% to 53% should be of interest to you. Do you want to know why? Well, these statistics represent the businesses that have faced lawsuits every year. 43% were lucky enough to only get away with threats of the same.
A breakdown of the lawsuits shows that 31.4% were due to a breach of contract. Forget the inconvenience and time you will spend fighting the cases. The cost implication could be as high as $150,000.
Without a doubt, this could be the death knell for a small business trying to establish itself in the market. That is why it is important to take lawsuit insurance. Read on to understand how this sound decision can save you with business new york state public adjusters.
Impact of Lawsuits on a Business
We have touched on the financial implications of a lawsuit on a business. It can take years to settle litigation. During this time, the business has to channel money into the process. There is also the impact of the loss of income and other extra expenses.
The same applies if you are using another company. The financial implications may affect the business cash flow. It can be hard to keep up with bills and other expenditures.
Fortunately, there is an option available from the best pre-settlement funding companies. They advance lawsuit cash funding that can keep you afloat as you wait for the case settlement. The lenders do not look at your credit score to determine creditworthiness. And, within 24 hours, you can get legal funding.
Another impact of lawsuits is the loss of relationships that may have taken years to build. There could also be damage to the reputation of the company, depending on the nature of the lawsuit. All these can have a profound effect on the earning capabilities of the business.
Astute entrepreneurs take business liability insurance. Such covers protect the owner and company from lawsuits or third-party liabilities. It takes care of the financial implications, including legal defense. So how can such insurance save the business?
Insurance Will Take Care of Financial Implications of Lawsuits
At the beginning of this article, we shared that the cost of litigation can be as high as $150,000. Such a cost may not do too much damage to an established company. But, a small business will feel the impact on the bottom line. General liability insurance protects the business against a wide range of third-party lawsuits. These include:-
- Bodily harm at the business premises;
- Liability claims;
- Damage to property;
- Libel or any other type of defamation.
General liability insurance will cover all the costs associated with such lawsuits. It saves the business from dipping into its coffers to cover such costs.
Workman’s Compensation
An employee suffers an injury during work hours. He goes to the hospital for an extended period. In the end, there are massive medical bills. Are you liable for such costs?
Unfortunately, the answer is yes. Workman’s compensation is mandatory. It provides monetary benefits in the case of injury or disability while at work. The insurance will also cover any medical costs arising from treatment.
Workman’s comp also provides protection for the employer as well. The employee cannot sue the employer once they accept their compensation. The advantage of taking on such insurance is the avoidance of expensive lawsuits. It will also save the parties involved from having to pay legal fees.
Professional Liability or Errors and Omissions Insurance
During the provision of services, it is possible to make some errors. It could be negligence, malpractice or misrepresentation. You could also fail to provide services, as you promised.
Take the example of failure to complete a project on schedule Other examples are medical malpractice suits. The aggrieved party can seek legal recourse, even if you don’t believe you are at fault.
The business can incur hefty costs fighting such lawsuits. Professional liability insurance will cover the business in such instances. Do note, you will need it as a separate cover from general liability, which does not cover such claims.
Cyber-Liability Insurance Cover
Cyber security remains a concern for most businesses. Loss of data through breaches or hacking can have significant impacts. As of 2021, there was a 424% increase in cyber-attack from 2020, targeting small businesses. Yet, a third of businesses with 50 or fewer employees do not invest in endpoint security. 60% believe that they are not a target for cybercriminals. Yet the truth is everyone is fair game for these nefarious individuals.
Data breaches can result in costly lawsuits from affected customers. It could also seriously damage the reputation of the company. Recovering from all these can be very difficult. In some instances, the business may even have to close its doors.
Cyber insurance covers losses resulting from damage to or loss of information from IT systems or networks. The reality is that it is not possible to protect the business 100% from cyber-attacks.
The criminals are always reinventing themselves. The sophistication levels of their attacks continue to confound cybersecurity experts. That means the company has to do all it can to protect any data it has.
In case of a breach, the insurance provides respite from the financial impact of lawsuits. Cyber insurance will also cover different things. These include the cost of ransomware. It prevents the hackers from crippling the networks if they carry out their threats. The company also gets cover for data recovery, security failure and system forensics. Others are reparations and legal defense.
Final Thoughts
A typical business has to grapple with so many issues. And, one of the worst things that can happen is to find yourself in court due to a lawsuit. The financial implications can be crippling. There is also the inconvenience and loss of time due to the processes.
And, that is not all, there could be significant damage to the company’s reputation. There are different types of insurance available to businesses. We have looked at general liability, professional liability, workman’s compensation, and cyber insurance. The company gets cover for legal defense, third-party expenses, and medical fees.
