What are some types of business liability insurance?
Liability risks are unique to each business, meaning a “one-size-fits-all” approach cannot be taken with insurance coverage. Fortunately, various types of liability insurance are available to provide protection tailored to your specific small business needs. Here are some of the primary liability insurance coverages that can help shield your business:
Commercial general liability insurance
Commercial general liability insurance, commonly known as CGL insurance, is an important part of protecting your small business against liability risks. It can provide protection if your business is held legally responsible for bodily injury or property damage to a third party.
Please be aware that the Commercial General Liability policy comes with several exclusions, including coverage for ‘professional services.’ For protection related to your ‘professional services,’ please refer to ‘Professional liability insurance’ as described below.
Product liability insurance
Is your business involved in the manufacture and/or sale of products? If so, your business could be held accountable should any of these products be responsible for causing bodily injury or property damage to a customer. Even a customer suffering food poisoning, could leave your business accountable for the consequences. To mitigate the losses resulting from product liability claims, consider obtaining product liability insurance. This coverage is usually included in your CGL policy, but you should always check with your insurance agent to make sure.
Several factors can contribute to product issues. Here are three:
- Design defect: This issue arises before the product is manufactured, wherein an improper design makes the product unsafe or faulty.
- Manufacturing defect: This problem occurs during the product’s manufacturing process, resulting from errors such as incorrect assembly or missing components.
- Marketing defect: This type of issue relates to how the product was marketed to the customer, including incorrect food labeling, inadequate safety warnings, or insufficient instructions.
Professional liability insurance
Professional liability insurance can help protect your business in those situations where a client holds you responsible for their loss, that resulted from errors in your work or from your services that failed to meet expectations.
The primary purpose of professional liability insurance is to offer protection to professionals against costly lawsuits initiated by their clients.
When you provide consulting, design, or other professional services to clients for a fee, occasional mistakes may occur. Whether it’s unintentionally missing a deadline or overlooking a critical requirement, such errors can expose your small business to expensive lawsuits from your clients. If your client experiences a loss due to errors in your work, they might file a lawsuit against your business. By incorporating professional liability coverage into your insurance policy, you can help shield your business from the financial burdens associated with these types of lawsuits.