Types of Liability Insurance Policies for Businesses

The cost of compensatory claims brought against business owners, independent contractors, and self-employed people due to negligence by workers, clients, customers, shareholders, investors, or members of the general public is covered by liability insurance

Due to the inherent risk that every firm encounters, liability insurance is typically a required insurance type as it can aid in legally defending your company against allegations of negligence that could result in legal ramifications.

Your business may face many possible risks and ramifications depending on the nature of your work, so the amount of coverage you require will vary from company to company. A general liability insurance audit can help you look at your company’s payroll and risk exposure to ensure you’re paying the right amount for your insurance. So when you’re searching for a policy, there are various liability insurance coverage options you should consider.

General Liability Insurance 

Business liability (BL) or commercial general liability (CGL) helps cover various general liability claims that assert your company has injured individuals or damaged their property. It also provides coverage to offset damage to your reputation or mistakes in your advertising. 

It’s vital to remember that general liability insurance does not protect your company’s or employees’ personal property against property damage. These claims are covered in part by commercial property insurance policies.

General liability insurance best provides protection when you face claims of bodily harm, property damage, damage to reputation, or advertising blunders.

Bodily Harm

Any physical harm suffered by a client or customer at your business is considered a bodily injury. For instance, your general liability insurance may help pay for the patient’s medical expenses if a customer enters your flower shop, slips on the wet floor, and fractures their leg.

It’s important to note that your employees are not covered by general liability insurance. Instead, your workers’ compensation insurance plan—a kind of employer liability insurance—covers them. 

Property Damage

Any harm you or your employees do to the property of a third party is considered property damage. For example, if the lawnmower from your landscaping business kicked up rocks that broke a customer’s glass, general liability insurance can help pay to cover any damages associated with the accident.

Reputational Damage

Reputational damage occurs when a business claims your company has harmed their reputation. General liability can assist in defraying your defense expenses if situations arise where you or your employees are accused of harming a competitor’s reputation.

Advertising Blunders

Copyright infringement liability claims arise from advertising mistakes. General liability insurance might help pay for your legal defense if your marketing company uses a copyrighted image in an advertisement without authorization.

Professional Liability Insurance

Errors and omissions insurance (E&O), commonly referred to as professional liability insurance (PL), aids in defending against allegations that your company offered services with errors. For instance, E&O insurance can help pay your legal defense expenses if a client sues you, alleging that you offered them bad financial advice and lost money. 

Additionally, professional liability can assist with allegations concerning:

  • Negligences
  • Misrepresentation 
  • Good faith and fair dealing are broken

Most firms require professional liability insurance–mainly if you provide clients with professional services. 

Employer Liability

Liability Insurance Employees who sustain sickness or injuries at work are not protected by professional liability. Your business requires workers’ compensation insurance for that level of coverage. 

Workers’ compensation is a sort of employer liability insurance that covers benefits for your staff members who become ill or injured on the job. And depending on your state’s laws, you and other business owners may be obliged to get workers’ compensation insurance. Purchasing this coverage type is a smart idea even if it’s not required by law in your jurisdiction because it can pay the cost of medical treatment for workers who become ill or injured on the job and defend your company from a lawsuit arising out of a work-related illness or injury.

Workers’ Compensation and Employer Liability Insurance Scenarios

If one of your employees becomes ill or injured due to their work, workers’ compensation may be able to protect them. Examples of possible covered scenarios and damages include situations like the following: 

  • Your manager broke her wrist after tripping over a stray package in her new office. Workers’ compensation may cover her medical costs. 
  • A coal miner’s extended exposure to low air quality causes black lung. Workers’ compensation may partially cover his medical expenses and continued care. 
  • After years of poor typing habits, your receptionist suffers from carpal tunnel syndrome. Bursitis and tendinitis are two other instances of ailments brought on by repetitive tension that may be covered.

In addition to covering medical expenses, workers’ compensation also offers: 

  • Disability compensation if a doctor determines that your employee is either temporarily or permanently handicapped. Your state determines the amount and length of disability compensation.
  • Replacement of lost wages when an employee needs to take time off to heal from an injury sustained at work. 
  • Funeral expenses if your employee tragically perishes in a workplace accident. 

Professional Liability Insurance for Contractors 

You must obtain some kind of contractor’s professional liability insurance if your company works in the design-build or construction management industries. This insurance covers experts against construction-related mistakes or losses that may occur during the planning, designing, and building of a structure. Additionally, it might shield you from mistakes made by independent contractors working on a project. 

Insurance for Directors and Officers (D&O) 

You need D&O insurance if your company has a corporate board of directors or advisory group. If your directors and officers are personally sued for negligent business management including instances of them failing to comply with workplace laws, committing fraud, stealing intellectual property, misrepresenting company assets, or misusing company funds, this insurance safeguards their assets. 

Insurance for Management Responsibility 

A bundle of coverages known as management liability insurance is used to safeguard corporate, public, and nonprofit organizations from various board-level risks. It is bought by companies with a board of directors, offering protection from the hazards of running a corporation. Employment practices liability, fiduciary liability, and D&O liability are frequently covered under management liability insurance policies.