A new kind of small business liability insurance policy is being sold exclusively to business owners who have retired and closed up shop. Introduced by the Travelers Insurance Cos. of Hartford, Conn., the policy protects against unforeseen lawsuits blaming the former business -- or its former owners -- for injury, loss, or other misfortune.
Most active businesses already carry such insurance. But aggrieved parties can come forward years after a transaction is concluded and sue for a variety of damages. If an unincorporated company has closed down, a plaintiff can sue the former proprietor or partners, putting their personal assets at risk and requiring them to pay lawyers' bills out of their own pockets. Manufacturing companies, whose products may remain in use for years, are especially vulnerable.
The Travelers Protection in Retirement Liability Policy is designed to guard against that danger by providing basic coverage of $300,000, including legal defense costs. In general, a customer can begin coverage with the new policy as much as two years after retirement. The premium is based on how much the business paid for its previous product liability insurance and is reduced each successive year as the likelihood of lawsuits decreases For example, says Robert W. Meyerhans, a Travelers assistant secretary, a company that was paying $1,200 a year for regular liability insurance coverage would probably pay about $900 the first year for the retirement policy and about $120 by the seventh year.
Such insurance was previously available on an individual basis rather than as a standardized policy. "Not many people understand the need for this kind of insurance," says Meyerhans.