How Much Liability Limit Do I Need for My Business?

We get this question a lot and of course it is an excellent question. Unfortunately there is not a good method to determine the answer. No one can tell a client with certainty what limit of coverage they should buy. But here at least are some things to consider in making this decision. Most clients initially do not realize this limit addresses both bodily injury and property damage for a claim.

1. For a contractor, what size of projects will be worked on? Will the projects be $250,000 houses or $2,500,000 commercial projects? How much could be lost due to a property claim?
2. For a contractor, could damage from your work delay the opening of a business? What is the potential revenue from that business for lost downtime?
3. For a technology firm, how much data could be exposed or “hacked”? How many clients’ files or clients of client’s files could be exposed? What is the value of data that could be lost?
4. For a retail firm, is your business connected to other larger firms or to a large retail property? How big is that property adjacent to your firm?
5. Are any limits of coverage required by your clients or vendors? What limits are required within a purchase order or contract?
6. For a manufacturer for products liability claims; what type of injuries could occur from the misuse of the product either from bodily injury or property damage?
7. In the case of bodily injury claims, there is no perfect answer to this question. What could be the medical costs of injuries caused or even in a fatal event?

While these questions all create a worst-case scenario and may not ever happen to your firm, these issues must be considered. Some of the best places to seek these answers are from the past experience with your firm or seeking guidance within your own industry. Is there data to be obtained from trade journals, association membership? Can the insurance agent or risk manager obtain claims data from other similar sized businesses?

Hopefully this article has provided some points to ponder in this decision. We suggest visiting with a good commercial insurance agent and seeking professional guidance with this question. Contact us today to get started on a free quote.