melloInsurance

Serving our clients, Serving our community

liability

Why do I need liability coverage?

What amount of liability insurance is adequate?  Why do home insurance limits start at $1,000,000? Why does my broker encourage a minimum of $2,000,000?   Aren’t these numbers just a little bit ridiculous? After all, I’m not going to get sued….

These are all very good questions and they are questions that we as brokers get asked quite regularly.  Typically property owners are a little confused over what liability insurance actually provides and when it would ever be used.  So, in this week’s blog we will look at some basic “Liability 101” scenarios so that you can hopefully understand a little more clearly what you are purchasing.

Liability insurance covers damages sustained to a third party’s property as a result of negligence.  This means that liability coverage only extends to things which are accidental in nature. The very definition of negligence in insurance context is “committing an action that a reasonable person would or would not do.”  This means that willful damage to a third party’s property is not covered, nor is there liability coverage for criminal activity, or conducting an activity that is inherently dangerous…. Which one could argue is something that “a reasonable person would not do.”

So, a couple practical examples might help with breaking this down further:

Example 1

You are in a hurry to leave for the weekend.  You leave the house in a rush and as a result you leave the coffee maker on.  In the middle of the night, said coffee maker shorts out, which starts a fire.  Your house burns down, and melts all the siding and seals on your neighbor’s house and windows.  The damage to your neighbor’s house? Well your liability coverage would pick that up! After all, the damage was your fault in this scenario, so why would your neighbor make a claim under their policy?

Example 2

You are driving your car at night.  You are a little sleepy – so your reflexes are a little slower than normal, and when they do kick in, they are exaggerated.  Driving along you think you see a deer running up the ditch on your right. Out of reflex you swerve to the left, but there is an oncoming car.  The oncoming vehicle swerves to miss you and in doing so, hits the ditch and collides with a telephone post. The resulting damage to the oncoming car?  Covered by your liability insurance! After all, your actions are the reason for the other car to be in the ditch, right?

Example 3

You are having a Roman Candle fight with your neighbor in your front yard, and instead of aiming your firework at your neighbor, you start shooting them at his home.  One of the fireworks gets under the vinyl siding and causes extensive damages to one side of his home. The verdict? NOT COVERED. The reason? The argument could be made first of all that you are doing an activity which is inherently dangerous.  Secondly, the argument could be made that since you were aiming your firework at the home, it could be said that it was a willful action to damage the property.

As for the values of liability coverage, it’s easy to justify the limits once you realize the types of losses that need to be covered by liability.  Once you start factoring repairing neighboring homes, or vehicles along with injury payments, it can get pricey!

Next time you are reviewing your policy, remember these examples, and consider the limit you carry.  Do you have enough coverage? For as little as $20 per year, you can upgrade your policy limit from 1 million to 2 million. Higher limits are available if required, please contact your broker for more information.

 

Keep you and your family protected with an Auto Pak policy.

We live in a province of government auto insurance. This is simple, yet complicated. Many people believe that when they purchase their driver’s license and registration from SGI that they are properly insured and completely covered. However, there are scenarios you need to be aware of that can put yourself at risk, if you do not carry an extension auto policy.

When you purchase your registration from SGI, you are accepting a $700 deductible on any type of physical loss to your vehicle, and $200,000 liability if you are found negligent while operating that vehicle. If you are comfortable absorbing $700 in the event of claim, that is completely fine, however, the liability amount is the main concern.

Most people think that we have “no fault” insurance coverage in Saskatchewan. While that may be true, there are certain scenarios where you can be still found at fault and on the hook for the damages. This includes actual property damage caused by the use of your vehicle. If you hit a building or another vehicle, those damages to the other vehicle/house are covered using your liability coverage. Now most losses are covered under 200,000 limit, however, there have been situations where people have derailed trains or have overturned semi trucks that were carrying harmful products causing damage to the environment. If you are found at fault, these physical losses are your responsibility and will come out of your liability limit. In both these scenarios, the losses amounted into the millions; which is horrific. With an extended liability policy you can purchase 2 million liability coverage for as little as $4 per month ($46 / year).

You can also be sued for additional income losses. Let me explain what that is. SGI has a cap on how much they can pay for annual income if someone is severely injured and can no longer work.  If you injure someone in a vehicle accident who is making more than the $94,587 cap. They can sue for the additional income that they were making prior to the loss. So if you hit a lawyer or doctor who makes 250k per year and they can no longer work. They can sue you for the additional 140k for the next 25 years (Or however long their career would have been for). This particular scenario ends up being $3.5 million. These types of claims can end up crippling a person or family for a very long time. Liability is by far the most beneficial product on the auto policy. Make sure you call our office and make sure you are properly protected as these are the claims that can cause huge financial problems.

Other products you can purchase on an auto pak are the following:.

  • Wildlife Waiver of deductible – if you hit any type of wildlife your deductible is waived.
  • Road Hazard Glass – If you buy a package policy you can add on this endorsement to cover stone chips or cracks to your windows.
  • Replacement Cost Coverage – If you purchase a brand new vehicle, you can obtain replacement cost coverage on the vehicle for the first few years. If something terrible happens and the vehicle is written off, you will receive a brand new vehicle similar to the one you had prior to the loss.
  • Loss of Use coverage – if you are in an accident and you need a rental vehicle to continue your day to day operation while your vehicle is being repaired, this coverage will pay for the costs to rent a vehicle. $1000 or $2000 limits are available. You can choose the limit that will work best for you.
  • Family Security – This coverage is automatically added with the liability coverage. This covers your family if you are hit by an uninsured or impaired driver who has no insurance coverage.

There are many other benefits to purchasing a package policy. Such as – coverage will automatically extend to a personal vehicle of similar nature, that you do not own, but are currently operating (ie. rental car or borrowed vehicle). Higher liability limits when you travel outside Saskatchewan and become higher risk of a potential lawsuit if there is an accident.

We are a community minded business and all we want is to make sure our friends and relatives are properly covered, in the event something awful happens. We all know someone who has likely been involved in some kind of accident; and unfortunately, we cannot see into the future to prevent them. However, at least with this coverage you can have peace of mind knowing you’ll be taken care of if something terrible does end up happening.

Ask us about small business insurance, it’ll provide you peace of mind.

You may wonder, “Why do I need business insurance?” It comes down to more than just what you own; your inventory, vehicles, buildings, equipment, etc. Although those items are extremely important to insure and keep track of, there are many other areas that you can be exposed to; the main exposure of course, is liability.

Before we get into the liability section, let’s get into those other areas. Insurance companies design policies that will benefit each business individually. A hair salon, for example, will require insurance on their stock, inventory, building (if they own it), and equipment such as chairs, clippers, etc. However, there are endorsements that insurance companies may wish to include, or can add on, that you may not think of; such as: outdoor sign coverage, accounts receivable, business income coverage, money and securities, data or cyber compromise, equipment breakdown, and many others. These types of coverages “fill the gap” on an insurance policy to make sure you are properly covered in the event of a loss.

Not all business types have these “pre-made” insurance packages available, so it’s important for us to have detailed conversations with you on how your business operates so we can create a policy that will meet your needs. Then if you make any changes or take on other types of business we will be able to amend the policy and make sure we have your business insured accurately. For example, some framing companies, will also take on business for other trades like roofing or concrete. They begin to do these lines of work on top of their framing jobs. That change can make a difference on your insurance policy, whether it is the different equipment and vehicles that you’d be purchasing or the new liability risks that come with roofing and concrete work.

As for liability insurance, it is important for us to have a discussion with you in detail about what your business operations are. How you operate, what type of work you will be doing, how many employees, etc. This information helps us determine what type of risks you will incur and what type of liability coverage will work for you to maximize your coverage. Liability losses can amount to extremely high costs if a major claim occurs, so it is important to make sure your policy is up to date with us.

We are interested in your business and want it to succeed; therefore we need to make sure your insurance needs are well looked after. By having an accurate policy in place, it will give you the peace of mind you need so you can focus on what really matters, your clients. If you have any questions about new or existing business insurance or would like to know more about options that can be added to your existing policy, please contact one of our insurance experts. We would love to connect with you.