Everything You Need to Know About Liability Insurance
When you're in constant contact with people, customers, clients, or their property, you need to be careful – you never know what can happen. Accidents occur all the time, and very often, you can't influence the sequence of events. So, if you want to avoid risks and save money, consider liability insurance.
Liability coverage is included in small business, auto, and homeowners insurance policies, and it can be a life-saver when it comes to the accidents for which you’re claimed responsible. This article will lead you through essential liability insurance concepts showing you why it is important to own the policy.
What is Liability Insurance Coverage?
Let's start with defining the term of liability insurance – it is a coverage policy that includes protection against potential third-party insurance claims. For instance, if you accidentally drop your client's phone, and it crashes, it will cover the expenses of replacing it or repairing it. Otherwise, you'll need to pay the money out of your pocket, which is in most cases, more expensive option. Another example of liability insurance includes the court expenses in case of lawsuits – if another person decides to sue you, your insurance carrier is obliged to defend you and to cover the legal costs, unless the policy states otherwise. There are various types of liability insurance, and each of them includes more or less the same coverages – let’s see the basic ones.What Does Liability Insurance Cover?
Generally speaking, liability policy is used for covering claims against you made by client, contractor, or a member of the public for damaging their property. However, the insurance agency won’t pay the money directly to you, but it will cover the costs for medical treatment, repairment or replacement of the damaged item or the legal costs regarding your defense. It’s also important to know that liability insurance doesn’t cover the personal injury of the business owner or homeowner. Knowing that you must be aware of the importance of the liability insurance – you never know what can happen during the meeting with your partners or during the chat with your neighbor on your doorstep. Even though you haven't had bad intentions, you'll need to pay the indemnity for other person's loss – and you're safe if you own a liability insurance coverage!Types of Liability Coverage
As you may assume, there are various types of liability coverage policies which are used for different purposes – business, car, or home. This article will go through each of them, emphasizing their basic coverages and crucial details. Let’s start with the first one.1. General Liability Insurance – Business’ Best Friend
If you're running a business, especially the one which includes everyday communication and meeting with clients, customers, or partners, general liability insurance policy is what you need. This coverage is also called commercial liability insurance. Look the example below: You're in the middle of the important meeting with your partners when your employee accidentally splits the water right on your partner's laptop, which stops working. The partner looks pretty upset, and he/she requires you to pay for the device replacement. In case you’re not insured with liability coverage, you’ll need to pay the total price out of your pocket. That expense might not look too significant at first, but if the accidents continue, they can lead to bankruptcy, which is definitely not a good start for business. So, consider general liability coverage if: • Your location is open to the public – if someone gets injured when slips on the wet floor (and you haven't put the proper sign of warning) of your facility, you're claimed responsible, and you'll need to repay for the medical expenses. • You sell products to customers – if you sell spoiled food to someone, that person can sue you for poisoning or any other inconvenience. If you’re insured, the insurance company pays for your court expenses. • Handle client property – if you’re running computer and laptop repair service, make sure you’ve purchased the general liability insurance policy – if you damage someone’s computer or laptop somehow, the insurance has your back.RELATED READING: • How Does Car Insurance Work? The Only Guide You Need • 10 Proven Tricks that Will Help You Lower Your Car Insurance • 7 Factors That Influence Car Insurance Price • Essential Things You Should Know About Homeowners Insurance • Small Business Insurance Guide – 5 Policies You Should Consider
2. Professional Liability Insurance - Protect Yourself from Errors and Omissions
People are often confused when it comes to professional liability insurance since it's quite similar to the general liability coverage. However, there is a slight difference between them – while general liability refers to a bodily injury, property damage or claims, professional coverage protects your business from claims of negligence, misrepresentations, or inadequate advice. Let’s have a look at the example below: Imagine yourself as a doctor – a patient comes to you asking you for the advice about allergy, and you give him/her medication without proper examination. After some time, the patient starts to feel bad, which is a result of the inappropriate medicine you've given to him/her. If that person decides to sue you for malpractice, all the legal costs will be covered if you own professional liability insurance. Professional liability insurance also comes in handy when: • You’re a software developer – if your clients start losing customers and sales due to the app you’ve designed, they can sue you. • You’re a consultant – if your project doesn't show the results as it's written in the contract, the clients can sue you to make up the losses. • You’re an architect – if the architect constructs a building whose safety is in question, the building owner can sue him/her. Those claims are quite expensive, so it’s better to think on time and save your budget. Professional liability insurance is also convenient for IT experts, accountants, real estate agents, and medical workers.3. Product Liability Insurance – A Crucial Part of Business Liability Insurance
Businesspeople like manufacturers, wholesalers, or restaurant owners are frequently targets of lawsuits. If you’re performing some of these jobs, consider product liability insurance which protects small businesses that include products that could hurt someone, or make people sick. For example: If you're running a drive-thru coffee shop, you must have a lot of customers on a daily basis. However, if some of them burn themselves due to low-quality paper coffee cups, they can sue you because you’re selling the harmful product. Professional liability insurance is useful if something you sell could: • Damage someone’s property – if you’re selling products for, let’s say, wooden furniture cleaning, and they end up damaging someone’s wooden table, your company can be sued. • Hurt someone – if you're producing furniture for public places, and if, for example, chair crashes due to the screws made of low-quality materials, and someone gets injured, you can face the court. • Make people sick – if your products contain certain ingredients that could affect someone’s health, and you haven’t emphasized that, the customers may sue you for negligence.
4. Liability Car Insurance – Enhance Your Car Accidents Protection
Liability car insurance is an obligatory part of any vehicle owner. Car accidents happen all the time, bringing more or less severe injuries and material damage. Liability car insurance covers the expenses of medical treatments and your defense in case you’re responsible for the accident. What is covered with auto liability coverage? • Bodily injuries (BI) – as mentioned, car liability coverage helps to pay for the medical expenses for the person who gets injured in the accident you provoked. • Property damage (PD) – in case you damaged other person’s vehicle or property, car liability insurance pays for the repairs up to your coverage limit. Besides, it can pay for your defense and legal expenses. However, it's essential to know that this insurance policy doesn't cover the damage to your vehicle. If you want to include the plans that would financially help you pay for the loss, consider comprehensive and collision coverages. For example: You're driving back home, and suddenly you crash with the vehicle you didn't see. You're seen as an at-fault driver, and the material loss of the other person's car is enormous. Car liability insurance will pay for that, but you'll need to cover the costs of repairment of your vehicle unless you own collision insurance policy.
5. Personal Liability Insurance – Essential for Homeowners
There is a liability insurance policy made for private purposes as well. Accidents can happen even under your roof, and if the injured person decides to sue you, personal liability insurance is there to help you pay for your defense costs and medical treatments, no matter if you're legally responsible or not. For example: Your neighbor's kids are playing in your living room when a picture falls from the wall and hits one of them in the head. The kid is fine, but if your neighbors decide to sue you, personal liability coverage will compensate for the expenses. Another example could be the situation where your kid, or any member of your family damages other person’s property (window, car, garden…) – again, your policy pays for the damage. When it comes to the liability insurance cost, it depends on various factors, like state and industry, and your insurance agency will give you the most accurate information!