What is liability insurance?
If someone is injured while visiting your business premises or a customer is hurt by a product your business sells, you can be held responsible. That is the risk that liability insurance covers.
Along with health insurance and workers’ compensation insurance, liability insurance is one of the most important insurance concerns small businesses face. Liability insurance, also called commercial general liability (CGL), covers the following:
- Bodily injury
- Damage to others’ property
- Personal injury, including slander and libel
- False or misleading advertising
CGL coverage pays for the injured party’s medical expenses.
It excludes you and your employees, who are covered by workers’ compensation insurance. Note: Even trespassers can sue you if they fall and get hurt on your business premises.
What is not covered?
Standard liability insurance does not protect a business against:
- Claims from sexual harassment, wrongful termination of employees, failure to employ or promote, or race and gender lawsuits. These and other employee-related claims are covered by employment practices liability coverage.
- Claims related to operating an automobile or truck. You will need an auto insurance policy for this.
- Claims related to wrongful practices by professional service providers (e.g., health care providers, lawyers, and consultants). You will need professional liability insurance, also known as errors and omissions insurance, for this.
- Claims related to workers’ compensation insurance. Workers’ compensation insurance protects a business owner from
claims by employees who suffer a work-related injury or illness.
What other types of liability insurance should I know about?
- An umbrella liability policy provides extra protection above standard policy limits. Umbrella policy coverage limits typically range from $1 million to $5 million and are appropriate for business owners who have large assets or may be especially vulnerable to lawsuits.
- Crime insurance protects businesses from theft and malicious damage, such as employee embezzlement.
- “E-insurance,” or Internet business insurance, covers Web-based businesses for damages caused by computer hackers and viruses.