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Liability Insurance Definition
Every business faces some level of risk, which is why most businesses need liability insurance. This coverage can help protect your business from claims, like malpractice or bodily injury, that could end in lawsuits or legal liabilities.
The level of coverage you need depends on the type of business you run, because every business has unique risks. A general liability insurance audit can help examine your business’ payroll and risk exposure to ensure you’re paying the correct amount for your insurance. For instance, construction businesses may need coverage with higher liability limits than retail stores. There are also different types of liability insurance coverage you’ll need to consider when looking for a policy.
Liability Insurance Types
The three main types of liability insurance coverage are:
- General liability
- Responsabilidad profesional
- Employer liability
Responsabilidad general
General liability insurance (GL) is often called:
- Commercial general liability insurance (CGL)
- Business liability insurance (BL)
It helps cover different types of general liability claims that your business caused bodily injury or property damage to others. It also covers reputational harm or errors in your advertising. It’s important to note that general liability insurance doesn’t cover property damage to your business or your employee’s property. Un commercial property insurance policy helps cover those claims.
General Liability Insurance Examples
General liability helps protect you if someone accuses you of:
- Bodily injury and property damages
- Reputational harm
- Advertising errors
Bodily injury includes any injury to a third party, like a customer or client, that happens at your business. For example, if a customer enters your flower shop, slips on your wet floor and breaks their leg, your general liability insurance can help cover the cost of their medical bills.
General liability insurance does not cover your business’s employees. Instead, they’re covered by your workers’ compensation insurance policy, a type of employer liability insurance.
Property damage includes any damage you or your employees cause to a third-party’s property. For example, if your landscaping company’s mower kicks up rocks that break a customer’s window, general liability would help cover the costs to repair the damage.
Reputational harm means another business is accusing your business of negatively impacting their reputation. Let’s say your workers compare your product to a competitor’s product during an event. When your competitor finds out, they file a lawsuit against your business. In cases like this, general liability can help cover your legal defense costs.
Some other examples of reputational harm include:
- Malicious prosecution
- Libel
- Slander
- Wrongful eviction
- Violation of privacy
Advertising errors involve liability claims of copyright infringement. If your marketing business use a copyrighted photo in an ad without permission, general liability insurance can help cover your legal defense.
You can get general liability coverage from private insurance companies, like The Hartford. Our specialists are available at 855-829-1683 and can help you figure out the types of insurance your business needs. You can learn more by getting a small business insurance quote.
Responsabilidad profesional
Professional liability insurance (PL), also known as errors and omissions insurance (E&O), helps cover claims that your business made errors in the services you provided. For instance, if your client claims you gave them inaccurate financial advice and sues you because they lost money, E&O insurance can help cover your legal defense costs.
Professional liability can also help cover claims alleging:
- Negligence
- Misrepresentation
- Violation of good faith and fair dealing
Most businesses need professional liability insurance, especially if you provide professional services to customers.
Coverages & Professional Liability Examples
Some examples of what professional liability can help cover include:
Attorney fees, which can cost anywhere from $100 to $200 per hour or more in some cases.1 Professional liability cases can last months or even years. That means it could cost you from $3,000 to $150,000,2 but professional liability insurance covers these legal bills if a claim filed against you goes to court.
Court costs, which can include expenses to reserve a courtroom and payments to professional witnesses.
Administrative costs, including the cost of gathering documents, such as:
- Medical records
- Business receipts
- Customer waivers
- Written testimonies
Settlements and judgments, which include the money your business may have to pay the plaintiff. Many businesses cannot afford to pay liability settlements or judgments on their own. Professional liability insurance can cover the payments for you.
To get professional liability coverage, get a small business insurance quote hoy mismo.
Employer Liability
Professional liability does not cover employees that get work-related injuries or illnesses. For that kind of coverage, your business needs workers’ compensation insurance.
Workers’ comp is a type of employer liability insurance that provides benefits to your employees if they get injured or sick because of their job.
Depending on your state, business owners, like you, may be required by law to buy workers’ comp coverage. Even if it’s not the law in your state, it’s still a good idea to get this coverage, because it can help:
- Pay the cost of medical care for employees that get hurt or sick from their job.
- Protect your business from a lawsuit for a work-related injury or illness.
Workers’ Compensation & Employer Liability Insurance Examples
Workers’ comp can protect your employees if they suffer an injury or illness that results from work. Some examples include:
- After moving into a new office, your manager trips over a misplaced box and fractures her wrist. Workers’ comp can help cover her medical expenses.
- A coal miner develops black lung from prolonged exposure to poor air quality. Workers’ comp can help cover the cost of his medical treatment and ongoing care.
- Your receptionist develops carpal tunnel syndrome from years of bad typing habits. Other examples of repetitive stress injuries include tendinitis and bursitis.
On top of paying for medical care, workers’ comp helps provide:
Disability benefits if a doctor says your employee is temporarily or permanently disabled. The amount and duration of disability payments depends on your state.
Missed wages when your employee needs to take time off to recover from a work-related injury.
Funeral costs in the tragic event your employee dies from a work-related accident.
If your state requires workers’ comp or you plan on buying it to ensure your employees have the protection they need, get a small business insurance quote hoy mismo.
2 Small Business Administration (SBA), “Impact of Litigation on Small Business.”