An Overview Of Contractual Liability Insurance
As an entrepreneur, one of the best ways to protect your business is to invest in the right insurance coverage. One of the forms of coverage you need is contractual liability insurance, which many entrepreneurs don't know about. Below is a candid overview of this form of insurance coverage.
What It Is
Contractual liability insurance protects you from liabilities that may arise when you enter into a contract with another party. That way, you don't have to suffer financial losses if you fail to meet your end of the bargain as contained in the contract.
Not all businesses need contractual liability insurance, but you need one if your business regularly enters into contracts with other parties. Below are some of the specific reasons you may need this form of coverage.
Contractual liabilities can cost your business significant money if you don't have insurance. Say you enter into a contract to supply another business with imported equipment, and the merchandise doesn't arrive on time. Without insurance, you have to source funds to cover the penalties as stipulated in the contract.
Many businesses have insurance to protect them from a variety of liabilities. Unfortunately, many of the policies specifically exclude contractual liabilities. Contractual liability insurance helps to bridge this gap so that you are fully covered.
Having contractual liability insurance is a means of strengthening your bargaining power when looking for or signing contracts. Clients will enter into contracts with you knowing that you have the resources, via the insurance coverage, to cover their losses should problems arise from your end. In fact, some businesses may specifically insist on insurance for them to do business with you.
Some contracts include clauses that exclude one party from liabilities that might arise during the execution of the contract. For example, if you are contracted to renovate a building, the owner of the building might draw up a contract that excludes them from liability if someone gets injured on the site during the renovation. In such a case, you will be left exposed to all the liabilities that may arise after the contract is signed, and insurance coverage can protect you from such losses.
As you can see, contractual liability insurance can help you out in several situations. If you don't have the coverage yet, talk to your business insurance agent for further discussions and help on how to buy affordable coverage. You may be able to bundle contractual liability insurance with other forms of coverage to lower your costs.