Understanding Liability Insurance: What Does it Cover?

As the name suggests, liability insurance is designed to protect you from the financial burden of any legal claims that may arise against you or your business. But what exactly does it cover? In this article, we will explore the different types of liability insurance policies available and what they protect you from.

General Liability Insurance

General liability insurance is a policy that covers you for any claims arising from bodily injury, property damage or advertising injury caused to another person or business. This policy is ideal for businesses that interact with customers or clients on a regular basis. Here are some common scenarios that general liability insurance can protect you from:

Scenario
Coverage
A customer slips and falls in your store
Bodily injury
You accidentally damage your client’s property while on the job
Property damage
Your competitor accuses you of false advertising
Advertising injury

It’s important to note that general liability insurance doesn’t cover any damages or injuries caused by your products or services. For that, you’ll need a separate policy known as product liability insurance.

FAQ – General Liability Insurance

Q: Do I need general liability insurance if I don’t interact with customers?

A: While it’s not mandatory, it’s always a good idea to have general liability insurance as accidents can happen anywhere and at anytime.

Q: What’s the difference between general liability insurance and professional liability insurance?

A: General liability insurance covers you for any non-professional services or actions, while professional liability insurance (also known as errors and omissions insurance) covers you for any professional services that you provide.

Q: How much coverage do I need?

A: The amount of coverage you need depends on your business size and industry. It’s recommended to consult with an insurance agent to determine the appropriate level of coverage.

Product Liability Insurance

If your business produces, manufactures or sells products, product liability insurance is a must-have policy. This coverage protects you from any lawsuits or claims resulting from damages caused by your products. Some common scenarios that product liability insurance covers include:

Scenario
Coverage
A customer is injured by a product malfunction
Bodily injury
A product causes damage to a customer’s property
Property damage
A customer alleges that your product caused them emotional distress
Personal injury

Product liability insurance is essential for any business that produces or sells goods. It can protect you from costly legal expenses and settlements, which can devastate your business if you’re not covered.

FAQ – Product Liability Insurance

Q: Is product liability insurance required by law?

A: While it’s not mandatory, it’s highly recommended, especially for businesses that produce, manufacture or sell goods.

Q: How much coverage do I need?

A: The amount of coverage you need depends on your business size and the types of products you produce or sell. It’s recommended to consult with an insurance agent to determine the appropriate level of coverage.

Q: Does product liability insurance cover damages caused by my suppliers or distributors?

A: No, product liability insurance only covers damages caused by your own products.

Professional Liability Insurance

Professional liability insurance (also known as errors and omissions insurance) is designed to protect professionals from any legal claims arising from their professional services or advice. This policy covers professionals, such as lawyers, doctors, accountants, architects, and consultants. Here are some scenarios that professional liability insurance can protect you from:

Scenario
Coverage
A client claims that your negligence caused them financial loss
Professional negligence
A client alleges that you provided incorrect advice
Professional error or omission
A client claims that you breached your duty of care
Professional duty of care

If you provide professional services or advice, professional liability insurance is essential. In the event of a legal claim, this policy can protect you from devastating financial losses and reputational damage.

FAQ – Professional Liability Insurance

Q: Is professional liability insurance required by law?

A: While it’s not mandatory, it’s highly recommended for any professional who provides services or advice to clients.

Q: How much coverage do I need?

A: The amount of coverage you need depends on your profession, industry, and the types of services you provide. It’s recommended to consult with an insurance agent to determine the appropriate level of coverage.

Q: Does professional liability insurance cover any damages caused by my employees?

A: No, professional liability insurance only covers damages resulting from your services or advice.

Conclusion

Liability insurance is a vital policy for any business or individual who wants to protect themselves from the financial burden of legal claims. Whether you need general liability insurance, product liability insurance or professional liability insurance, the key is to determine the appropriate level of coverage for your specific needs. By doing so, you can minimize the risk of financial loss and focus on growing your business.