FAQs About Types of Liability Insurance

When it comes to the downsides of being a business owner, there is one that stands out above all others: no one wants to deal with the headache of a lawsuit. And even just thinking of potential legal fees is enough to give most entrepreneurs nightmares.

Liability insurance can be invaluable in such cases. Insurance can help protect your business from the most severe economic impacts when the worst has happened.

What Are the Different Types of Liability Insurance?

In its most basic form, liability insurance provides businesses protection from damages that may result from injuries or loss of property.

There are three main types of liability insurance:

  • Employer liability insurance: This insurance comes in handy when an employee sues for damages related to compensation for an injury or illness. (The injury or illness would have to be proven to be work-related in the first place.) This coverage is also distinct from workers’ compensation that almost all states require a business to have.
  • General liability insurance: Also sometimes referred to as business liability insurance, this is the most basic of any type of liability insurance. This policy won’t cover a business’s property damage. But still, it will likely cover issues that arise from ad errors or injury or damage done to others.
  • Professional liability insurance: This insurance is typically used by professionals such as lawyers, doctors, and accountants. Liability insurance helps protect such individuals from lawsuits stemming from work they have done for clients. This type of policy can also be called errors and omissions (E&O) coverage.

Each covers a different type of claim, and there can be subsets of the three broader categories listed above as well. Other more specific types of liability insurance include umbrella liability, employment practices liability, and directors and officers liability.

What Factors Effect Liability Insurance Costs?

There are a number of factors that can contribute to a business’s general liability insurance cost. Some elements will be out of a business owner’s control. These include aspects that are unlikely to change, such as where the company operates and what industry it is in.

Other cost considerations a company does have some measure of control over. This includes such factors as what limits the coverage has and the past claims history of the company. Higher amounts, in either case, will surely result in higher premiums.

Get a few quotes from different providers to ensure that you are getting the best price when shopping for liability insurance. Doing so will only take a few minutes and couldn’t be easier now that most insurers offer free quotes online.

Knowing the range of costs and services available on the market will make choosing the proper protection for your business all the easier.

Where Can You Get Liability Insurance?

If you aren’t sure where to start with liability insurance, it is best to get a few quotes at first probably. Doing this will bring you into contact with multiple insurance providers and help you find an insurer that you are comfortable working with. (It may be more than one insurer, to begin with.)

However, once a partner has been found, an insurance agent will be able to meet with you and go over your business’s insurance needs. One useful tool can include a general liability insurance audit that can help discern what level of coverage is appropriate for your size of enterprise and industry.

What If I Need Multiple Types of Liability Insurance?

In the course of meeting with an insurance professional, a business owner may find that multiple types of liability insurance are appealing to them. This is excellent news, as multiple policies can often be rolled together to increase potential savings.

The total discount may vary per insurer and policy, but typical savings for car owners can be in the range of 5-to 25-percent. Of course, bundling is no guarantee of savings, so be sure to do your homework before committing to a single insurer.

If I File a Claim, Will My Liability Insurance Premiums Go Up?

As anyone who has car insurance knows, filing a claim can increase premiums, which is a problem. After all, what is the point of having liability insurance if you’re too afraid to use it? Sadly, it’s true.

Many business owners are hesitant to actually use their liability insurance due to the thinking that filing a claim will cause their premiums to go up. And while filing a claim can certainly cause monthly payments to rise, this isn’t necessarily always the case.

And it shouldn’t be a reason never to file a claim if one is necessary. The true answer is a bit more nuanced than that.

In reality, a single claim won’t likely have a significant impact on your business’s premiums. However, repeated claims or claims for very large amounts will almost certainly result in raised rates.

Also, when the term of a contract is due, an insurer may choose not to re-sign your business to another policy. For this reason alone, it is always a good idea to learn from your business’s past claims history to prevent mistakes in the future. Doing so won’t just help keep premiums down. It’ll help ensure the safety of your company’s future as well.


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