Liability insurance is a general term to describe different types of insurance coverage that helps protect you or your business if someone files a lawsuit or claims against your company.
What Is Liability Insurance?
Liability insurance helps protect you financially if you are found legally liable for property damage or personal injury to a third party. This liability protection is included in most home, auto and business insurance packages and is tailored to different situations.
Business Liability Insurance
There are different types of insurance you can get to protect your business from liability claims. Common business liability insurance policies include:
- General liability insurance to help cover claims that your business has caused personal injury or property damage to someone else or their property.
- Professional indemnity insurance to help cover your legal costs and judgments against you if a client sues your firm for any mistakes made during the professional services your firm provides. This coverage is also known as errors and omissions insurance.
- Data breach insurance to help you respond to a breach if personally identifiable information is stolen from your business. Some insurers may refer to this coverage as cyber liability insurance.
- Commercial umbrella insurance to help you cover costs that exceed your basic liability coverage limits.
- Commercial auto insurance to help protect you and your employees on the road if you drive a company car. It can help cover property damage and injuries to someone else if you cause an accident.
Personal Liability Insurance
You may want to consider coverage to help protect you in personal situations, including:
- Personal liability insurance to protect you if someone is injured on your property. It can also help cover you if you are responsible for damaging another person’s property. This coverage is part of your homeowners or renters insurance.
- Personal liability insurance to help you pay for medical expenses as a result of a car accident you caused.
- Property damage liability insurance to help you pay for repairs caused by an accident you caused or are found responsible for.
- Umbrella insurance that expands your homeowners and auto liability coverage limits.
How Does Liability Insurance Work?
Depending on the type you have, liability insurance helps protect you or your business from a covered loss. These policies work when:
- The loss will occur during the term of your policy
- You file a claim with your insurance company
- You have a covered cause of loss
- It’s a good idea to review any liability insurance you have to make sure you understand how it works. Policies may contain exclusions (things they don’t cover) and list the types of losses they don’t cover.
Do I Need Liability Insurance?
Almost all states require you to have auto insurance that includes liability coverage. This protects you if you injure another person or cause property damage in an accident. Not all states require you to have personal liability coverage to protect you if someone is injured on your property or property.
However, mortgage lenders often require liability coverage under homeowners insurance. In addition, some landlords may require liability insurance as part of the rental agreement. You may want to consider liability insurance to help protect you and your property from unexpected costly claims.
How Much Liability Insurance Do I Need?
When choosing your coverage limits, you should determine what assets you want to protect, such as your home, savings and investments. It is recommended that you select a coverage limit for your policy that matches or exceeds your net worth so that you have sufficient coverage to protect your assets in the event that you are sued.
Liability Insurance Minimums and Requirements
Your state may have minimum liability insurance requirements for auto insurance. State auto insurance laws vary, but you’ll likely need to have minimum coverage for:
- Liability for personal injury
- Liability for damage to property
- With other types of liability insurance, several factors can affect your coverage needs. These include:
- Your claim history
- Your position
- The type of your business
How Many Years Have You Been in Business?
You can work with an insurance agent or specialist to better understand local laws. This can help you make sure your coverage is in compliance with state rules.
Limitations and Exclusions of Liability Insurance
Liability insurance helps cover third-party claims for property damage or personal injury. These policies do not provide coverage for the policyholder. For example:
Personal injury insurance will not help cover your medical bills if you are injured in a car accident that you caused. You will need personal injury protection (PIP), also known as no-fault insurance, to protect you in these situations.1
Property damage insurance will not help pay for repairs to your car if it is damaged in an accident. Collision coverage can help you with this type of claim.
General liability insurance will not help a business owner if their employees are injured on the job. It also won’t help cover the cost of repairs if the business property they own is damaged. Instead, business owners will need workers’ compensation insurance and commercial property insurance.
Like most other types of insurance, your liability policy does not cover willful or criminal acts. It is important to check your insurance policy regularly. You should make sure you understand the exclusions and limitations of your policy.
Get a Liability Insurance Quote
We are a property and casualty insurance company with more than 200 years of experience. Whether you need business insurance or liability insurance, our specialists will help you choose the right type of insurance. Get a liability insurance quote today.
