VARIOUS TYPES OF LIABILITY INSURANCE
Business owners are exposed to a range of liabilities, any of which can subject their assets to substantial claims. All business owners need to have in place an asset protection plan built around available liability insurance coverages, including the following types.
Commercial general liability insuranceprotects a business from claims arising from bodily injuries that occur within the workplace, or injuries or damage caused by company employees. A common accident that occurs in workplaces is when a customer slips on a wet floor. Should an employee accidentally damage a customer’s vehicle with a piece of equipment, the coverage will pay the cost of repairs. A general liability policy will cover a company’s legal costs as well as the judgment or settlement amount.
Employer’s liability and Workers’ Compensation is a compulsory coverage in all states for employers, which protects the business against liabilities arising from injuries or death of an employee.
Product liability insurance is for businesses that manufacturer products for sale on the general market. Product liability insurance protects against lawsuits arising from injury or death caused by their products.
Indemnity insurance provides coverage to protect a business against negligence claims due to financial harm resulting from mistakes or failure to perform. Errors and omissions (E&O) coverage is required by businesses engaged in financial and legal services, such as insurance, accounting, mortgage lending and law firms. Other professions and occupations, such as contractors, consultants and maintenance professionals carry indemnity insurance as a practical matter because of their exposure to “failure to perform” claims.
Director and officer liability coverage is for a business that has a board of directors or officers, with the insurance covering them against liability if the business is sued. While a corporation by definition offers some amount of personal protection against liability to employees and directors, some companies choose to offer additional protection to those key members of the executive team.
Umbrella liability policy is a personal liability policy designed to protect against catastrophic losses. Generally, umbrella liability coverage kicks in when the liability limits of other insurance are reached.
Auto liability insurance is a type of car insurance coverage that's required by law in most states. If you cause an accident, liability coverage helps pay for the other person's expenses. There are two types of auto liability coverage that drivers in each state must have: bodily injury liability coverage and property damage liability coverage.
WHAT IS COVERED BY LIABILITY INSURANCE?
Auto liability insurance helps cover:
Bodily injury.
If you're at fault for an accident that injures another person, bodily injury liability coverage helps pay for their medical expenses.
Property damage.
If you cause an accident that damages someone else's property (their car, for example), property damage liability coverage helps pay for repairs.
Auto liability insurance is a type of car insurance coverage that's required by law in most states. If you cause an accident, liability coverage helps pay for the other person's expenses. There are two types of auto liability coverage that drivers in each state must have: bodily injury liability coverage and property damage liability coverage.
WHAT IS COVERED BY LIABILITY INSURANCE?
Auto liability insurance helps cover:
Bodily injury.
If you're at fault for an accident that injures another person, bodily injury liability coverage helps pay for their medical expenses.
Property damage.
If you cause an accident that damages someone else's property (their car, for example), property damage liability coverage helps pay for repairs.
LIABILITY INSURANCE COVERAGE LIMITS
The amount your insurer will pay for a covered liability insurance claim is subject to the coverage limits you choose. Each state sets minimum coverage limits for bodily injury liability and property damage liability that drivers must purchase, but you may decide to buy additional coverage. You may see three liability coverage limits on your car insurance policy:
Property damage liability limit.
This is the maximum amount your insurer would pay to repair damage you cause to another party's property. The maximum payout would not exceed the limit you've set.
Bodily injury liability limit per person.
This establishes a maximum payout for each individual who is injured in an accident that you cause.
Bodily injury liability limit per accident.
This sets a cap on the total amount that your insurance provider will pay out for all medical expenses other people incur from a single accident you cause. It's important to set this limit at an amount that makes you comfortable, as it may be needed to help pay for the medical expenses incurred by multiple people.
Consider the following: You are at fault for a crash that injured three people in another car. Your bodily injury liability limit per person is $50,000 and your bodily injury limit per accident is $100,000. If Person 1's medical bills total $40,000, Person 2's cost $30,000 and Person 3's cost $25,000, you're likely covered, as each person's bills were under $50,000 (your bodily injury limit per person), and the total cost of injuries is $95,000, which is lower than your $100,000 bodily injury limit for a single accident.
Any costs that exceed your liability coverage limits are your responsibility — in other words, you'd have to pay them out of your own pocket. That's why it may be a good idea to increase your auto liability limits above the state's minimum requirements by purchasing more coverage.
WHAT'S TYPICALLY NOT COVERED BY LIABILITY INSURANCE?
Liability coverage typically doesn't pay for damage to your own car after an accident — collision coverage helps with that.
Liability coverage also does not extend to costs associated with your own injuries after an accident you cause. If you want this type of coverage, you may want to consider medical payments coverage.