Liability Insurance

By Entrepreneur Staff

Pencil

Liability Insurance Definition:

Insurance coverage that protects against claims against the insurance holder of property damage, personal injury, negligence and so on

Customers, employees, repair people, delivery people and anyone else who comes in contact with your business property can hold you liable for your failure to take the proper degree of care. This can be as simple as keeping your sidewalk swept or shoveling the snow on your front walk. If someone is injured as a result of your negligence, the court will generally find in favor of the injured party, even if your negligence was only slight.

Basically, there are two types of liabilities against which you have to insure yourself and your business: liabilities to nonmembers of the firm and liabilities to members of the firm (employees and partners). Most of the liabilities toward outsiders will be covered under a comprehensive general liability (CGL) policy. A CGL policy covers the following four risks:

  1. Payments due to accidents and injuries that might happen on your premises or to your employees;
  2. Any immediate medical expenses necessary at the time of the accident;
  3. The attorney fees and expenses for investigation and settlement;
  4. The cost of court bonds or other judgments during appeal.

The limits to liability are determined on a per-accident and per-person basis. Additional limitations may include a total on bodily injury or property damage.

A CGL policy does not protect you against all liabilities, however. These include:

  • Liability caused by an employee automobile accident while on the job;
  • Liability related to products manufactured or sold, or services offered, by your company;
  • Liability insurance covered under workers' compensation laws.

For these, you'll need additional insurance coverage and should contact your insurance company to determine exactly what coverage you need.

More from Insurance

Auto Insurance

A contract for an automobile in which one party agrees to pay foranother party's financial loss resulting from a specified event(for example, a collision, theft or storm damage)

See full definition

Health Insurance

A policy that will pay specified sums for medical expenses or treatments. Health policies can offer many options and vary in their approaches to coverage.

See full definition

Bonding

A guarantee of performance required, either by law or consumer demand, for many businesses, most typically general contractors, temporary personnel agencies, janitorial companies and businesses with government contracts

See full definition

Business Interruption Insurance

Insurance coverage that protects a business in the event of natural disaster, fire or other extenuating circumstances that affects the ability of your company to conduct business

See full definition

Latest Articles

Growing a Business

To Achieve Sustainable Success, You Need to Stop Focusing on Disruption. Here's Why — and What You Must Focus on Instead.

Instead of zeroing in solely on disruptive innovation, embrace a pragmatic approach to innovation, recognizing and leveraging the potential within ongoing industry shifts.

Business News

Mark Zuckerberg Says This CEO Is the 'Taylor Swift' of Tech

Meta's CEO posed with Nvidia CEO Jensen Huang on Instagram Wednesday.

Real Estate

3 Emerging Trends Shaping the Future of Real Estate

These three innovations are reshaping the real estate industry — discover tips for effectively covering these trends.