Liability Insurance

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

What is Liability Insurance?

Liability insurance is a type of insurance policy that provides protection against claims resulting from injuries and damage to people and/or property. It covers legal costs and payouts for which the insured party would be found liable up to the policy’s limits.

Types of Liability Insurance

  1. General Liability Insurance: This is the most common form. It covers legal hassles due to accidents, injuries, and claims of negligence. Businesses often require this insurance to protect against financial losses from lawsuits.
  2. Professional Liability Insurance: Also known as Errors and Omissions (E&O) insurance, it protects professionals like consultants, accountants, and lawyers against claims of negligence or harm due to poor or erroneous advice or services.
  3. Product Liability Insurance: For businesses that manufacture, distribute, or sell products, this insurance covers financial loss due to a defective product that causes injury or harm.
  4. Employer’s Liability and Workers’ Compensation: This insurance is for business owners to cover employee work-related injuries or illnesses.
  5. Commercial Property Insurance: While not strictly liability insurance, it often includes liability coverage, protecting the business against injuries that occur on its property.
  6. Directors and Officers Liability Insurance: This protects corporate directors and officers in the event they are personally sued for wrongful acts made in managing a company.
  7. Umbrella Liability Insurance: Provides additional coverage beyond existing limits and coverages of other policies. It kicks in when the limits of the underlying policy are reached.
  8. Cyber Liability Insurance: This covers businesses against losses caused by cyber-attacks, data breaches, and other digital security threats.
Liability Insurance

Shopping for Business Insurance

When shopping for business insurance, it’s important to consider the specific needs of your business. Different businesses have different risks, and it’s crucial to ensure that you’re adequately covered. The Insurance Marketplace provides a platform to explore various business insurance options. You can compare policies and find the best fit for your business needs.

Types Of Liability Insurance

Types of Liability Insurance and Their Coverage

Type of InsuranceWhat It Covers
General LiabilityAccidents, injuries, negligence claims
Professional LiabilityNegligence in professional services
Product LiabilityInjuries caused by defective products
Employer’s LiabilityWork-related employee injuries
Commercial PropertyInjuries on business property
Directors and OfficersWrongful acts of directors/officers
Umbrella LiabilityExcess coverage over other policies
Cyber LiabilityCyber attacks and data breaches


Understanding and choosing the right type of liability insurance is essential for protecting your business from potential financial losses. Evaluate your business needs, compare different types of coverage, and choose a policy that offers comprehensive protection.

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Frequently Asked Questions

What are the two types of liability coverage?

Protect your business from legal and financial liabilities with Commercial General Liability (CGL) insurance and Business Liability (BL) coverage.

What are examples of liability coverage?

Regarding personal liability claims, here are a few you should know: If someone is hurt in your home and incurs medical bills because of that injury, the policy may cover those costs. Furthermore, if there’s financial compensation sought due to damages caused by your negligence or omission, the legal expenses related to defending yourself against these lawsuits might also be included. Finally, bodily harm is done, or property damage resulting from careless behavior on your part could also fall under this umbrella.

What are the limits of liability insurance?

By setting liability limits, your insurance carrier will pay an uppermost amount of damages (“indemnity”) in the event of any claims. These limitations are split into two sections: one per claim and a collective limit.

What is business liability insurance?

Business liability insurance is a form of insurance that provides financial protection to businesses if they are held liable for causing injury or damage to others.

How does liability insurance differ from other types of business insurance?

Liability insurance explicitly covers claims related to injuries or damage caused by the insured. Other types of business insurance, such as property insurance or worker’s compensation, focus on different aspects of risk protection.

Why is liability insurance important for small business owners?

Liability insurance is vital for small business owners as it protects them from potential financial losses and legal liabilities resulting from accidents, injuries, or damage caused to others during business operations.

Who needs commercial property insurance?

Commercial property insurance is needed by businesses that own or lease physical property, such as buildings, equipment, and inventory, to protect against damage, loss, or theft of their assets.

Is general liability insurance required?

General liability insurance is not universally required by law, but specific industries, contracts, or business activities may have legal or contractual obligations mandating its coverage.

What are the critical differences between liability insurance and business property insurance?

Liability insurance protects against claims arising from injury or damage caused by the business. In contrast, business property insurance covers physical assets like buildings, equipment, and inventory against damage or loss.

Can liability insurance cover liabilities arising from social security-related violations or employee benefit disputes?

Liability insurance may provide coverage for liabilities arising from social security-related violations or employee benefit disputes, depending on the specific terms and coverage of the insurance policy.

Why is it important to get general liability insurance?

It’s crucial to get general liability insurance coverage to protect yourself from potential risks. A general liability insurance policy provides comprehensive coverage against bodily injury, property damage, and personal and advertising injury claims. This type of insurance covers the cost of legal defense, settlements, and judgments arising from covered incidents. The general liability insurance cost will vary depending on factors such as the size of your business, industry risks, and coverage limits.

Whether you’re a small business owner or a seasoned professional, having general liability insurance is essential. In addition to general liability coverage, professionals may consider obtaining professional liability coverage to protect against claims of errors or negligence in their services. If you need general liability insurance, it’s recommended to consult with insurance providers to find the appropriate coverage for your business needs.

What does general liability insurance cover?

General liability insurance covers bodily injury, property damage, and personal and advertising injury claims. It covers legal defense costs, settlements, and judgments arising from covered incidents.

Is general liability insurance required by law?

In most cases, general liability insurance is not required by law. However, certain industries or professions may be legally obligated to carry this type of insurance. For example, contractors and business owners working on public projects may be required to have general liability insurance as a condition of their licensing or permit. It is best to consult local regulations and industry guidelines to determine if general liability insurance is mandatory for your specific situation.

Which type of insurance protects a person from loss from lawsuits?

Liability insurance is the type of insurance that protects a person from loss from lawsuits. It provides coverage in case the policyholder is held legally responsible for injuries or damages caused to another party. This insurance helps to cover legal fees, settlements, and judgments awarded to the injured party.

What are the different types of liability insurance?

Different types of liability insurance include general liability insurance, professional liability insurance, and product liability insurance. General liability insurance provides coverage for accidents or injuries that may occur on the business premises, while professional liability insurance protects professionals from claims of negligence or errors. Product liability insurance covers damages caused by a defective product.

What is the difference between professional and general liability insurance?

Professional liability insurance and general liability insurance both protect businesses, but they cover different risks. Professional liability insurance, also known as errors and omissions insurance, safeguards against claims related to professional services provided. On the other hand, general liability insurance covers claims for bodily injury, property damage, and personal injury.

How does liability insurance work?

Liability insurance protects individuals or businesses against claims brought by third parties for injuries or damages. It works by covering the costs of legal defense, settlement, or judgment if the insured party is found liable. Policies typically have coverage limits and may also include exclusions or deductibles.

What does comprehensive general liability insurance cost?

The cost of comprehensive general liability insurance varies depending on several factors including the size of the business, industry, location, and coverage limits. On average, small businesses can expect to pay between $400 and $1,500 per year for this type of insurance. However, it’s recommended to obtain multiple quotes from different insurers to get an accurate estimate.

What are general liability limits?

General liability limits refer to the maximum amount an insurance policy will pay out for covered claims. These limits are the total amount available to cover bodily injury, property damage, and personal injury claims. It is important to carefully consider your coverage needs and select appropriate general liability limits to ensure adequate protection for your business.

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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