A Guide to Different Types of Liability Insurance
Whether you are a business owner or someone who is worried about his or her finance, liability insurance can protect you. However, a business owner or service provider usually requires liability insurance.
As a business owner, you’re likely busy enough to ensure your company is profitable and growing. But it’s also essential to prevent any downfalls due to lawsuits against your company. And commercial liability insurances prove to be valuable here, especially for small and medium businesses (SMEs). SMEs comprise 60-65% of the commercial insurance premium market.
You don’t need to spend time learning about all the different types of insurance options out there. But you need to understand the basics of commercial insurance and how it can protect your business from unexpected costs and losses. This guide will break down each type of coverage so that you can make informed decisions about your insurance needs.
Why Should Someone Get Liability Insurance?
Liability insurance is a type of insurance policy that protects you if you’re found to be legally liable for damages or injuries caused by your actions. It can cover medical bills, loss of income, and other expenses.
If you’re a business owner, liability insurance is an absolute must-have. If something happens on your watch, say, someone slips and falls on your property, or a customer purchases something from you and later finds out it’s defective, liability insurance can help cover the costs associated with those situations.
As an individual, liability insurance is also essential to protect yourself against any potential legal issues. If someone gets hurt due to something you did, they might take legal action against you to recover damages for their injury or other losses. Liability insurance will help pay for these costs and legal fees if necessary.
General Liability Insurance
General Liability Insurance is a form of business insurance that covers claims arising from bodily injury, property damage, and personal injury.
General liability insurance protects you against customer, vendor, or employee claims. For example, if a customer slips on the ice near your store entrance and breaks his leg while entering the building, general liability coverage would pay out as long as it was not due to any negligence on your part.
It is one of the most commonly purchased insurance. According to the market analysis by Research and Markets firm, the global liability insurance market size is supposed to reach $432.81 billion by 2031.
Vendor Liability Insurance
Vendor liability insurance is a type of business insurance that covers the vendor in the case of a lawsuit stemming from a product or service they provided.
This lesser-known insurance type is for businesses that sell products or services to other companies, and it can be purchased by any business that does so. Vendor liability insurance protects you from situations like:
- When a customer uses your product incorrectly or otherwise causes damage to themselves or others due to its use
- When a customer buys your product but never pays for it, leaving you to cover the loss
- When a customer gets sick from eating food that you prepared, they sue you for medical costs and pain and suffering
Product Liability Insurance
Product liability insurance is an essential part of running a business. If you’re using a product that can harm people, for example, you need to ensure you have the right coverage.
Product liability insurance covers your business against lawsuits related to products sold or services rendered. It’s a type of insurance that protects businesses from being held liable for injuries or damages caused by their products and services.
If someone buys something from you and it harms them in any way, they can sue you for damages, and if they win, they’ll be awarded money to cover those damages. This can include medical bills, loss of wages due to injury, or even death.
But if you have product liability insurance, then the insurance company will pay out on claims instead of you having to take the hit yourself. The Takata Airbag lawsuit is one of the most famous examples of a product liability case.
Employer Liability Insurance
Employer liability insurance covers the costs of any legal action against an employer, whether it’s related to wrongful termination, discrimination, or sexual harassment. It also covers cases where a team member gets injured and sues their employer for negligence.
This insurance can be beneficial if your company is sued by an employee or former team member who feels wronged by you, your company, or one of your employees.
The exact need for it depends on the size of your company and how much risk it takes to do business. For example, suppose you work with machinery or hazardous chemicals or employ people who work with children or seniors. In that case, you should purchase additional protection against lawsuits related to those areas.
It is also like worker’s compensation insurance. This insurance covers the wages for employees who are injured while working. According to the U.S. Bureau of Labor Statistics (BLS), the average cost of compensation given by employers was around $41.86 an hour in September 2022.
Umbrella Liability Insurance
Umbrella liability insurance is a type of personal umbrella policy that provides additional protection above and beyond what your other insurance policies offer. It provides extra coverage if you are sued, or someone sues you. For example, if you are injured in an accident and sue the driver who injured you, then this would be covered under your umbrella liability insurance.
An excellent example of when it would come in handy would be if someone were to sue you for damages resulting from a car accident. If they were to win their case against you, they would collect damages from your assets until they reached their total payout amount.
This means any money left over after paying all the court fees will return to your possession instead of being given away as part of their judgment against you! The most common types of claims covered by Umbrella liability insurance include the following:
- Invasion of privacy
- Copyright infringement
- Negligence or malpractice
- Personal injury
The insurance landscape is ever-changing, so staying current on the latest developments and trends in the industry is essential. If you have any questions about your business insurance needs or would like assistance finding a policy that fits your budget, contact an insurance provider today.