Liability insurance becoming ever more critical for small businesses

In a risky and unpredictable business environment, insurance is playing an increasingly important role. As firms insured against business interruptions during the Covid-19 pandemic’s level-5 lockdown can attest to, that cover allowed them to survive an unprecedented event.

However, while most small and medium-sized businesses (SMEs) have insurance to cover buildings, vehicles, office and other equipment, and even business interruptions, liability insurance is typically not top of mind. 

Storm Mhlambi, senior manager for specialist liability at Auto & General, explains that liability insurance provides protection against claims to recover loss arising from personal injury or damage to property. It is specifically designed to protect businesses from the potential liabilities associated with their operations and actions, as well as the products and services they offer to customers. 

“What many smaller businesses don’t realise is that even one liability claim can put an entire company at risk, particularly if it is sued for an amount higher than the value of the business,” she says. 

“In a tough economy, businesses are being held accountable more than ever before, with litigation becoming much more prevalent, even for seemingly minor issues. The majority of small businesses are not in a position to take a large financial knock, which is why liability insurance is so important.” 

Auto & General’s specialist liability insurance products are tailored to suit the specific commercial needs of the business. They provide up to R100m in cover to pay for the legal defence costs incurred in an action against the insured business for which it is liable. 

“Small businesses tend to build their reputation on the back of one or two individuals, and it is often this good reputation which is central to their success. Our specialist liability insurance will pay the legal costs of defending the business if it has not done anything wrong,” says Mhlambi. 

Auto & General’s specialist liability cover includes:

• Broadform liability insurance to protect businesses against claims by third parties for bodily injury or damage to property they suffer as a result of the firm’s day-to-day business activities.
  
  
• Professional indemnity to cover professionals for errors in the services they render that cause third parties financial loss.
  
• Directors’ and officers’ liability insurance, which provides financial protection for the directors and officers of a business in the event they are sued for breaching their fiduciary duties.
  
  
• Events liability insurance, a tailored offering aimed at addressing the risks and liabilities that come with organising and hosting events.

“Events liability insurance provides protection to event organisers for various risks, including injuries and damages. This is different from public liability insurance, which covers only third-party claims arising out of the business’s general operations. Events liability insurance, on the other hand, is designed to cover incidents that occur in the context of the event,” says Mhlambi.

One of the benefits of events liability insurance, she says, is that cover can be structured for a particular period, such as a one-day event, a multi-day event, or frequent or continuous events, and can be tailored to cover specific activities and risks. 

She explains that, while small businesses are often put off by high annual fees and complicated industry jargon in insurance products, Auto & General’s specialist liability insurance products have been designed and structured specifically with small businesses in mind. Clients are provided with the option of paying either an annual or a monthly premium, depending on their preferences and needs, while each product’s terms and conditions are written in clear and easily understandable language. Provision has also been made to include more than one product in the same policy, rather than requiring clients to purchase a number of stand-alone policies.

Though all four of the products making up Auto & General’s specialist liability cover insurance suite — broadform liability, professional indemnity, directors’ and officers’ liability, and events liability — are offered by insurance brokers, they are also offered directly to businesses, which reduces costs.

“Our experienced consultants are adept at customising specialist liability cover based on the industry your business is in, as well as your business profile and its specific risk factors, to ensure your business is covered for what you need,” Mhlambi says.

For more information about Auto & General’s specialist liability cover insurance suite, visit the company's website.

This article was sponsored by Auto & General.