Liability insurance is designed to financially protect you if you or your business injure people or damage property. It covers legal payouts and lawsuit costs. However, it does not cover intentional damage or criminal acts.
This insurance policy pays third parties instead of policyholders. Different types of liability insurance cover both parties after an unintentional injury. You can opt for this policy if you practice medicine, drive a car, or own a business.
Liability insurance policies are gaining momentum as more people and companies start owning high-risk assets. In 2021, the liability insurance market was valued at USD 252.34 billion. By 2031, this number will rise to USD 432.81 billion, with a 5.7% CAGR.
In this blog, we will discuss the main types of liability insurance policies you can choose from.
#1. Professional Liability
You can refer to this policy as errors and omissions insurance (E&O). It helps cover the claims made by clients, highlighting service errors. Professional liability insurance can protect your business from potential negligence claims resulting from unintentional violations or misinterpretations.
Clients can sue you if your professional services do not meet their expectations or cost them money. Therefore, professional liability will help with alleged negligence and legal defense claims. Technically, individual consultants can also opt for this insurance policy.
#2. Vendor Liability
This liability insurance covers concessionaires, vendors, and exhibitors. According to Marine Agency Corp, it protects the short-term demonstration or promotion of products and services. You will need vendor liability insurance if you sell services or goods at an exhibition venue.
You can learn more about vendor liability insurance by discussing it with an insurance provider. They will state that this liability coverage safeguards your company from accidents and property damage expenses.
#3. Commercial General Liability
Commercial general liability insurance covers claims made by employees or clients for property damage or bodily injuries. This insurance policy is a must-have for small businesses. It will protect your business’s reputation by covering the losses from wrongful advertising or personal injury lawsuits.
You can refer to this as a business liability policy as well. It shields your company from third-party claims. For instance, you must pay for the medical expenses if your client gets injured at your company’s construction site.
#4. Product Liability
All businesses selling manufactured goods should have a product liability policy in place. It will cover the costs of claims against a malfunctioning or damaged product. Usually, your customers will file a lawsuit if they receive any property damage or bodily injuries while using your merchandise.
These lawsuits arise from the failure to warn about chemical content and defective designs. Examples of a product liability case would be the presence of asbestos in insulation or lead in paint. However, you will only get these claims if the damage was unintentional.
#5. Employer Liability
Professional liability insurance policies do not safeguard your employees’ finances in the event of a work-related injury. That is why you need workers’ compensation or employer liability policies. This insurance policy is crucial if you want to protect your employees.
This liability insurance policy pays medical costs and protects your business from lawsuit claims. Additionally, it covers missed wages, disability benefits, and funeral costs.
Other Underrated Liability Insurance
The number of liability insurance policies is growing as new incidents occur. Apart from the standard liability insurance mentioned, you can also find policies like:
- Trade credit insurance protects your accounts from bankruptcy, protracted default, and insolvency
- Carrier legal liability safeguards the costs of replacing damaged or destroyed merchandise in transit
- Commercial crime insurance protects losses from third-party fraud, robbery, burglary, and employee fidelity
- Directors’ and officers’ liability covers legal costs from wrongful termination lawsuits from employees
- Umbrella liability insurance protects you from incurring losses once the other policy limits are reached
Getting these insurance policies will showcase business maturity and protect livelihoods. That is why you must select one that suits your personal or business requirements.
The Bottom Line
Imagine your company has sold a defective product that has injured a few customers. These individuals will go to court and ask for compensation for their injuries. That is where liability insurance can save you from out-of-pocket costs for claims.
Furthermore, you must choose from a list of liability insurance policies. For instance, you can opt for a product, commercial general, or professional liability if you own a small company. Similarly, cyber risk insurance will safeguard your organization’s data from cyberterrorism.
Each liability insurance policy is unique to your personal and business needs. Hence, you must know the potential risk exposures and coverage scope before choosing one. Remember to set a budget for liability insurance and understand the limits, exclusions, and deductibles.