What are the Types of Liability Insurance?

When someone mentions liability insurance, they usually think of general liability insurance. But this insurance isn’t as straight forward as it seems, nor does it cover all types of liability risks.

General liability insurance steps in if you (or your business) cause bodily injury liability or property damage to someone else. General liability is a term used in auto, home and business insurance policies. Although the danger and the means of injury or property damage change, the coverage remains, at its base, the same. This insurance is extremely important for both casual homeowners and business owners. Whether you’re having people hang out by your pool or inviting customers into your restaurant, accidents are bound to happen. It’s important to know that anyone injured can receive the medical attention they need and that you won’t lose all of your money if the victim decides to sue. It can also cover issues concerning libel, slander, wrongful eviction and copyright infringement.

There are certain areas general liability doesn’t cover, however. General liability does not cover:

• Employee injuries (if the policyholder is the employer)
• Criminal acts
• Negligent acts
• Auto accidents
• Loss of products
• Product liability

Luckily, there are other liability insurance policies that you and your business can utilize. Some insurance is required by law in certain states to protect other people. For example, two common insurance policies required for businesses are:

• Workers Compensation: Part of workers compensation is medical payments for the victim, but the other half is liability coverage. If an employee is injured at work, workers compensation helps pay legal expenses if the employee decides to sue after the injury.
• Commercial Auto Liability: Commercial auto insurance also includes other coverages, but it also includes liability. In most states, you must carry a certain amount of bodily injury liability and property damage liability coverage. This is to ensure that the victim of an accident ruled to be your fault will receive compensation for the damages.

Check your state’s insurance requirements to make sure you have the right amount of coverage. Some insurance isn’t required legally but is extremely valuable to protect against different risks. Optional liability insurance includes:

• Professional Liability Insurance: Professional liability insurance covers claims of negligence. In other words, it protects you and your business if you’re accused of causing a client to lose money. This is helpful for industries such as accounting and consulting.
• Directors and Officers Liability Insurance: Also known as D&O insurance, this liability insurance protects the business if a director or officer of the board is sued due to an action made while serving on the board.
• Cyber Liability Insurance: In the modern era, more and more information is stored online. Cyber liability insurance can help protect your business if client information is lost or stolen from a cyber-attack.
• Crime Insurance: Though you try your best to vet your employees carefully, the unexpected is always possible. Crime insurance can help replace funds if an employee is caught stealing company funds or committing fraud.
• Product Liability Insurance: If your business sells a product or service, product liability insurance can cover you if a product or service causes bodily injury or property damage.

How Much Does Liability Insurance Cost?

Liability insurance costs vary depending on several factors. If you’re a homeowner, general liability insurance comes as part of your homeowners insurance policy. As a business owner, you may purchase different liability insurances alone or as part of a package. A business owners policy (BOP), for example, combines property coverage and general liability into a more affordable package for small business owners.