Liability insurance protects you against claims resulting from injuries or damage to other people or property. Claims of malpractice or bodily injury can easily end in lawsuits or legal liabilities, which is why most businesses need liability insurance.
Depending on the industry, type of business, and number of employees, the level of risk can differ. However, there are 5 types of liability insurance every business needs. Keep reading to discover what they are, and why you need them.
Professional Liability Insurance
Professional Liability Insurance covers you when clients bring claims for loss or damage resulting from negligent services or advice your business provides. It covers the costs of damages, legal defense, and even loss of earnings caused by incidents like negligence, inaccurate advice, or misrepresentation.
Copyright infringement and libel cases can also be covered. The fact is, there are countless situations where this coverage is needed. Your industry and business type will generally determine your needs. However, this liability insurance does not cover bodily injury or property damage.
Here’s an example of when and why a business needs this liability insurance. Let’s say you’re an architect or a structural engineer. A client builds a structure using your design, which is flawed. There is a structural failure, and they sue you. This liability insurance product covers you for such a situation.
Is it compulsory? Technically, no. For example, state law does not mandate Professional Liability Insurance in Texas for small businesses. However, some professionals need this type of liability insurance to be licensed in the state and work on government contracts. This is common in several other states.
Employers’ Liability Insurance
Has an employee slipped, tripped, or fallen and injured themselves while at work? Employers’ Liability Insurance protects your business when employees sue you for work-related illness and injury. It works in conjunction with workers’ compensation and covers claims if you don’t have workers’ compensation.
Work-related injuries, illnesses, and fatalities are more common than you might think. That’s why most employers in the US are required by law to have workers’ compensation coverage for workers who are injured, fall ill, or die as a result of their working conditions.
Once again, the state of Texas is a notable exception. The Lone Star State doesn’t require most private employers to have workers’ compensation. Only private employers who contract with government entities must have it.
But whereas workers’ compensation is designed to protect your workers, Employers’ Liability Insurance protects your business. It covers your business against damages when you’re found liable to pay for an employee’s work-related injury, illness, or death.
Commercial General Liability Insurance
Most U.S. businesses are underinsured, and many small businesses are not insured at all. Even when these smaller businesses are insured, they tend to focus on Commercial Property Insurance. While that is important for replacing stolen property or repairing property damage, it’s simply not enough.
Commercial General Liability Insurance provides liability insurance for general business risks. This general liability product for businesses covers claims that your business caused bodily injury or property damage to others. It does not cover property damage, so you’ll still need property insurance for that.
Here is an example of when and why you need this insurance product. A customer walked onto your business premises, fell, and injured themself. It was discovered that they slipped because the floor was wet. Their medical bills are covered by this type of insurance.
Commercial Auto Insurance
In the first quarter of 2023, approximately 286 million vehicles were operating on roads throughout the United States. There are an estimated five to six million car accidents each year on US roads, many of them involving company vehicles.
It’s no surprise, then, that most US states mandate car insurance for both individuals and businesses. But what type of insurance do you need for your business vehicles? Although accident damage can be expensive to repair, repairs to your vehicle after an accident should not be your primary concern.
Commercial Auto Insurance covers you in cases of liability concerning your business-owned vehicles, but not personal or rental vehicles used for work. The accidents covered involve vehicles not owned by the business and business-owned vehicles.
Here is an example of when and why you need it. Your employee crashes the company vehicle on the way to work, causing damage to another vehicle. Their vehicle damage is covered by this insurance product.
Employment Practice Liability Insurance
Employment Practice Liability Insurance (EPLI) is a specialized liability insurance product that all businesses with employees need. It covers losses incurred in litigation and the settling of wrongful employment practices liability claims for discrimination, harassment, or wrongful termination.
Regardless of how well you think you treat your workers, there is always the possibility that they will see things quite differently. With this liability insurance product, your business will be covered in the case of claims by employees that their legal rights have been violated.
Let’s look at an example of why your business would need EPLI. An employee claims that while at work, they were discriminated against based on their gender, age, or race, or even sexually harassed. Your EPLI policy covers your business in cases where such claims are made and damages sought.
