Basics of Liability Insurance

Operating a business or practicing your profession carries the risk that you will receive complaints even lawsuits for accidents in your business premises or for injuries or damages caused by your service to other people.

How do you cover your business from such risk? Learn from our guide what insurance you can use to protect your business or practice.

Accidents happen and if it happens to your business and you are not adequately protected, this could be damaging. Your personal assets if you are operating as a partner or sole proprietor, are exposed to risk in this scenario if you go without adequate protection. Still, even if you are operating an LLC or corporation, the business is still liable to pay for expenses in relation to damages done to people and their properties while they were in your place of business when an accident occurred. These damages could be bodily injuries sustained by third parties – customers, visitors and suppliers – while they were in your business premises or injuries directly arising out of an action or negligence by you or your employee.

General Liability Insurance

You can minimize the risk of facing this possible liability by putting in place a risk management plan. However, even a strict risk containment plan could fail. A way to fully protect your business from this risk is to subscribe to a liability insurance policy. Having a liability insurance ensures that you will be covered from damages from a personal injury or property damage lawsuit and be compensated for the legal costs in fighting one. Liability insurance could be part of a larger insurance policy like the property and casualty insurance, in which case, it is called a business owners’ policy. Separate, but almost similar in coverage is the commercial general liability policy. The general liability insurance protects a business from the most common injury and property damage lawsuits.

State laws vary on what particular occurrence is covered and policies have a set amount of maximum coverage. When getting one, it is best to review both state laws and the terms of your policy. Also, you can get either an occurrence policy or a claims-made policy. The difference between the two is on the timeframe at which the obligation of the insurer runs. Under an occurrence policy, a claim is still valid months or even years after an accident occurred as long as that accident happened during the coverage period. Under a claims-made policy, a claim is valid if it is timely filed when the policy is still effective.

Professional Liability Insurance and Product Liability Insurance

Depending on your type of business, you may be best protected by more specific types of liability insurance – the professional liability insurance and the product liability insurance. The professional liability insurance is most suited for businesses in the service industry like doctors, lawyers and accountants. It protects medical professionals from malpractice suits and attorneys from lawsuits arising out of errors of omissions. Product liability insurance is best for manufacturing businesses. It insures a business from lawsuit arising out of mishaps, injuries, ill health effects or death caused by the manufactured item like food or toys.


  • Mike S. said on February 5, 2010
    Hi! What would be the best Insurance for company like Private Security Company?... patrolling resident premises. Or will I need them both? Also how much would it cost? Thank you! Mike. US, WA
  • MAHESH said on November 24, 2011
    Can someone please help me to know what are the licenses required to start a security agency.. I am from Kerala,India..Are the processes same for all states?
  • Hadj said on March 29, 2013
    i plan to enter the jet ski renting business in Tunisia this summer. ski rental business already awarded of cost, laws, maintenance and "OF COURSE" insurance. how much is the insurance policy for this kind of business!? I'm thinking about opening a small rental spot in Tunisia, the city of Sousse.. If you have any info or advice for me before i make my move i'll greatly appreciate. I really need some info on where i could buy new jet skis for a good price and how much am i looking to spend on insurance?
  • Natalie Lambert said on November 26, 2013
    Hi. looking for insurance for our Motorized Kayak Fishing Charter business in Ft.Myers, Florida. anyone have an idea?
  • Eric said on January 26, 2016
    I am trying to start a personal security consulting company. What type of insurance will I need?
  • James expert adviser said on January 29, 2016
    @Eric, many insurance companies have insurance package as "security guard program" that covers a lot of area. call the companies to get your quote.

    Jestin James
    Startup Biz Hub - Senior Advisor (Staff)


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