Buying insurance is not on top of any business owner’s list of favorite things to do. 

There are just too many kinds of insurance from too many providers. And, of course, you don’t get to benefit from having insurance unless a crisis comes along. 

However, if that crisis does occur, proper insurance cover can make or break your business. 

Liability insurance is one of the most basic forms business coverage, though there are different variations. Here’s the run-down to help you get an overview and decide what kind you need to protect your business – or if you need any at all. 

What is Liability Insurance? 

In general, it protects you if someone brings a legal claim against you for accidents, injuries, and negligence. 

It will cover your obligations as well as your legal defense. 

The classic example of when you need liability insurance is a customer getting injured on your business premises. For instance, they could trip over that floorboard you haven’t gotten around to securing. Or they could get an electric shock from that piece of wiring you’ve been meaning to fix. 

Consequently, you could be facing a potentially ruinous lawsuit. In that case, having coverage has your back. Often, liability insurance is included with a standard business owner’s policy, or BOP.

However, there are different types of liability insurance – some of which go far beyond this classic case. 

What Different Types of Liability Insurance Are There? 

To start with, general liability insurance covers all injuries and property damage that customers, clients, delivery people, and other non-employees may suffer on your premises. They typically cover legal fees as well as settlements and judgements. 

Next, professional liability insurance covers you against claims for negligence or malpractice. It’s also sometimes known as errors and omissions insurance. For instance, if you’re a financial consultant and your advice leads to someone losing considerable amounts of money in investments, this type of insurance will protect you in potential lawsuits. 

Another type of liability insurance is employment practices liability insurance. This helps you deal with claims brought against you by current, former, and potential employees. For example, if someone sues you for harassment in the workplace, or discrimination during the hiring process, employment practices will cover you.

One of the newer types of liability insurance is cyber liability insurance. This kind of insurance protects you against legal claims by customers and clients if you fall victim to a cyber breach. 

Imagine your computer systems getting hacked because one of your team members used a weak password. Now you have to contact all of your customers to let them know that their data is in the hands of cyber criminals. Not only will this lead to a monumental loss of confidence in your business, it can also result in legal claims. 

Cyber liability insurance covers the costs of notifying customers and monitoring their credit. It also helps you deal with legal expenses and potential extortion claims from criminals. 

Does Your Business Need It? 

In general, what type of liability insurance you need – or whether you need it at all – really depends on what sort of business you are running. 

If you ever welcome anyone onto your business premises, general liability insurance is strongly recommended. This holds even if you run your business from your home. Your homeowner’s insurance typically doesn’t cover injuries or accidents of people who come for business purposes. 

Say you’re a freelance architect, and you’ve re-designed a few rooms in your home as an office and a space to meet clients. You also have a puppy that can get carried away when playing with someone new. A simple dog-bite accident and the resulting legal claims can bring your entire business to the brink of ruin. 

In contrast, if your business operates primarily online or handles sensitive client data in the virtual sphere, cyber liability insurance is a sensible investment. Especially considering the rising rates of cyber crime since the start of the pandemic. This particularly applies to digital professionals such as web designers and SEO specialists, as well as anyone who handles personal, financial, or tax information. 

When it comes to employment practices liability insurance, you can see the number of people you employ as a proxy for how likely you are to need it. The more people are in your team, the more likely it is that one of them might bring a lawsuit against you. 

For professional insurance, the considerations are different. As soon as you provide services that could cause someone bodily harm, property damage, or a financial disadvantage, you should seriously consider getting this type of insurance. In addition, many larger contracts require you to have errors and omissions coverage before you can sign. 

Conclusion 

Liability insurance is one of the cornerstones of a well-rounded business insurance strategy. It can help you defend yourself against legal claims. Also, it and aids your business in overcoming crises such as accidents to data breaches that could otherwise be disastrous.