FAQ: Why Are My Business Insurance Limits So High?March 17, 2016
Although you probably understand the importance of having business insurance in place, you could find yourself looking at your policies and wondering, “Why are my business insurance limits so high?”
It’s a pretty reasonable question; your business might be a small one that only brings in a six-figure income (or less!) each year, but you might have millions of dollars in insurance coverage. This could make it seem like you are paying out a lot more for insurance than you have to, but the truth is that your company is a lot better off with higher levels of insurance.
There Are Legally-Required Minimums
First of all, you should know that even small businesses are required to carry certain types and levels of insurance. For example, you are required to have workers’ compensation insurance to protect your employees in the event of an accident. In New Jersey, you are required to hold disability insurance.
Plus, the owner of the building that you rent/lease or the lender that you are purchasing your building through might require certain levels of coverage. Your insurance company will ensure that you have at least the minimum amount of insurance required for your business by law to help protect you.
Legal Fees Are Expensive
Just remember that legal fees are expensive. In the event of a claim, you might be required to pay both your own and the other party’s legal fees if you lose. Plus, you will not want to settle for an inexpensive lawyer who won’t work hard for your company, and you won’t want to find yourself in a position where you cannot afford the legal representation that you need.
With the right insurance policy, however, your insurance will cover your legal fees and any legal fees that you might have to pay for another party. This can help you ensure that you have the legal representation that you need without any stress. Since a lawsuit can be stressful enough on its own, this is important.
Claims and Settlements Can Be Costly
If you get sued, you might be surprised by just how high the claim can be. For example, if someone gets hurt on your property, you might have to pay for very expensive medical costs. If the person has to go to the hospital, has to have surgery, or is otherwise seriously injured, these costs could add up more than you think.
In some cases, it is also worth your while to just settle the case. This means that you will offer a certain amount of money to the plaintiff without actually admitting fault. This can be a good idea in some situations because it allows you to handle the case quickly and relatively quietly, and it can prevent all of the costs associated with a long and drawn-out trial.
However, in a lot of cases, settlements can be extremely expensive. In order to get the other party to agree to the settlement, your lawyer will have to make an appealing offer. If you don’t have the money to pay the settlement, then you may have to go through a long and even more expensive trial. If you have good insurance, however, you’ll be able to cover these matters. This can be extremely helpful in the case that your company ever gets sued.
As you can see, there are multiple reasons why insurance limits for businesses are often so high, even for small businesses. If you have more questions about business insurance or would like to better protect your company from these situations and more, contact us.