Question

1. What steps could you take to improve your credit worthiness?
2. Some businesses sell products and services that can injure customers. List three (3) examples and explain how these companies probably use their insurance.

Answer 1

Steps to improve credit worthiness are:

1. Reduction of debt- When the amount owned by individuals, firms is less, the credit rating will be high.
2. Payment on time- Everyone should plan to pay the bills and payments due on time. The late payments hamper the business and relationship with the creditors.
3. Checking of business credit report- The business credit report should be checked timely to improve the credit position of the company.
4. Don’t over utilize the credit cards- The debt and the credit cards are required to meet certain expenses of the business but too much dependency on credits leads to business failure.
5. Negotiation with creditors- When business man is not able to make the payments timely to the creditors, the payments should not be skipped. The businessman should make contact with the creditors and negotiate the terms of the payment which saves the business from getting into trouble.

Examples of businesses selling products and services which can injure customers:

1. Food and beverages- It may cause sickness to the customers.
2. Automobiles- There may be design defect which may cause bodily injury to the customer.
3. Tobacco selling companies- The incorrect labelling of the products may lead to the injury to the customers and the companies face lawsuits for the same.

These mistakes and issues lead to the claims from the customers and affect the profitability of small businesses to great extent. The businesses require the below insurance for protection:

1. Product liability insurance- This insurance helps to protect the businesses from the product liability claims.
2. Commercial general liability insurance- It protects the business from legal liability of bodily injuries and property to the third party.
3. Professional liability insurance- When clients claim that the financial loss has happened because of wrong advice, this insurance provides protection against the claim.