One of the major benefits of a corporation is an individual's limited liability for business debts. However, the protection does have its limits. Corporation directors, officers and employees can be held financially liable for personal actions. Several types of corporate insurance, also known as business insurance, protects individuals involved in the company and the corporation itself.
General liability insurance protects corporations against claims of negligence against company representatives, products and services. General liability typically covers legal claims due to an accident or an injury. The insurance policy pays for any costs incurred from bodily injury, medical expenses, property damage, libel or slander. In some situations, a client may even request proof of general liability insurance before they do business with a company.
Property insurance covers loss and damage of company property after events like vandalism, civil disobedience, storms, fire or smoke. Even corporations that don't own valuable buildings and equipment should consider an investment in property insurance. Most property insurance policies define property to also include lost income, papers, money and business interruption. All-risk policies typically cover all types of incidents except any specifically excluded by the policy. Peril-specific policies only cover the specific losses listed in the policy.
Also known as errors and omissions insurance, professional liability insurance protects a company against claims from clients of malpractice, negligence and errors. Although the concept is similar to general liability insurance, claims of negligently performing professional services are excluded from general liability policies. Professional liability insurance is a must for companies that provide services in the area of healthcare, law, insurance, consulting, accounting and finance. Depending on the profession and location, the state may even require the corporation to carry professional liability coverage.
Directors and Officers Insurance
Like professional liability claims, management liability lawsuits are often excluded from a general liability policy. Directors and officers insurance protects directors and officers from claims of mismanagement of company affairs. Although directors and officers insurance is often associated with public companies, privately held corporations can also benefit from the coverage. Lawsuits regarding mismanagement of privately held corporations can stem from disgruntled employees, upset investors and frustrated creditors. The insurance covers legal fees, settlements and other associated lawsuit expenses.
Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.