Liability Insurance

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Business liability insurance is a special type of coverage that protects you against the risk of liabilities, lawsuits and other legal claims. If you drive a personal vehicle, you might already be familiar with the concept of liability insurance because this type of insurance is required in most states to legally drive a car or motorcycle.

What you might not know is that if you’re a business owner, you may be opening yourself up to expensive legal liabilities if you operate without some form of liability insurance.

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The Best Liability Insurance:

What is Liability Insurance?

Liability insurance is designed to protect you against legal claims made by third parties. Third parties might include clients, employees, customers or anyone else whom you do business with.

For example, if a client slips on a patch of ice on your property, sprains his ankle, and sues you for the cost of his medical bills, liability insurance will typically cover the cost of legal representation as well as medical bills.

Auto Liability Insurance

Liability coverage is the most basic type of auto insurance on the market and is required to legally drive in most states. If you’re found to be at fault for an auto accident, liability insurance pays for damage to the other driver’s vehicle, any medical bills incurred by the other driver as a result of the accident, damage to property caused by your vehicle and medical bills incurred by your passengers.

Your own liability insurance will not cover you in any circumstances, so if you want protection in the event that your car is stolen or you’re the victim of a hit-and-run, you should make sure that your auto insurance policy also includes comprehensive coverage.

Types of Insurance

Liability insurance coverage for cars works the same way that most home insurance coverage does.

You can shop around for policies by company, and each company uses its own unique formula to determine how much you’ll pay in a monthly premium and deductible. Some factors that influence how much you’ll pay for auto liability insurance usually include the type of vehicle you drive, how many years of experience you have on the road, your credit score and how many accidents you’ve been involved with in the past.

Because every insurance company uses its own formula to determine your coverage, it’s possible to get identical coverage from ten different car insurance providers at ten different price points. It’s a good idea to shop around and collect multiple quotes to make sure you’re getting the best deal.

Business Liability Insurance

Unlike liability insurance for vehicles, liability insurance for businesses is not required by law in most industries. However, if you don’t have at least some business liability insurance, you can be left completely financially responsible for any lawsuits brought against your business.

Business liability insurance protects business owners against third-party claims. Coverage can include legal defense expenses, financial liability judgments and judgments related to medical expenses. There are a number of types of business liability insurance that can provide increased protection for you, your business, your employees and damage caused by the products you produce.

Many business owners assume that if they aren’t engaging in any financial malfeasance or shady business practices, the threat of a lawsuit is too insignificant to justify the cost of insurance. However, these business owners often fail to consider that they can be sued for things that they were not directly involved in. The phrase “anyone can sue for anything” is partially untrue in that parties who bring a suit against a business need to state a claim for which the court can grant relief to receive a judgment, but even frivolous lawsuits can cost tens of thousands of dollars to defend.

Business owners can also be sued for any harm that comes to guests (and in some states, even intruders) on their property or for harm caused by a product they produce even if they outsource labor to a third party. Liability insurance offers financial protection to defend against these claims as well as cover any settlements or judgments awarded by a court.

Though most businesses are exempt from legally-mandated liability insurance, there are a few exceptions. For example, many states require that businesses involved in mining, construction and demolition activities maintain business liability protection in the event that a bystander is injured due to their activities.

These requirements vary by state, so make sure you speak with a local insurance agent or attorney in your area who can advise you on specific state and county requirements.

What Does Liability Insurance Cover?

For Cars

There are two main types of auto liability insurance:

  • Bodily injury liability coverage helps cover medical expenses for injured drivers and passengers if you’re found to be partially at fault for an accident. It does not cover your medical bills or expenses after an accident. For example, if you’re involved in an accident and you, your passenger and another driver are all injured, BI insurance only covers medical bills incurred by your passenger and the other driver.
  • Property damage liability coverage helps pay for repairs needed to another person’s property following an accident you’re partially responsible for. The most common PD insurance claims are for vehicle damage, damage to homes and mailboxes and damage to other home structures like basketball hoops and playsets. PD insurance will not cover damages to your property after a collision.

You’ve probably noticed that liability insurance doesn’t protect you or your vehicle after an accident. If you want coverage for your medical bills, you’ll have to purchase additional medical payments coverage. If you want coverage for your vehicle’s repair bills, collision coverage can help with that.

Twelve states and Puerto Rico employ no-fault auto  insurance laws that require each driver involved in an accident to file a claim with his or her insurance provider regardless of who caused the accident. In states with no-fault auto insurance laws, drivers are required to purchase personal injury protection alongside the standard liability insurance that’s required to drive in every state besides New Hampshire.

For Businesses

Business liability insurance is a bit more complicated than auto liability insurance. Some common types of business liability insurance coverages include:

  • General liability insurance is the most basic type of business liability insurance. The coverage protects you against a financial loss that results from defending yourself against lawsuits, pursuing defamation and libel lawsuits, and settlement bonds and judgments.
  • Product liability insurance protects your business against financial loss as a result of bodily harm or injuries caused by a defective process. If your business manufactures, distributes, sells or wholesales any products, product liability insurance can protect you.
  • Professional liability insurance protects youand your business against financial loss resulting from employee negligence, malpractice or job errors. If your business markets a service to customers, you can benefit from professional liability insurance.
  • Commercial property insurance protects your business against loss and damage to your commercial property due to a variety of natural perils. Some of the most common named perils include fires, smoke damage, wind and hail storms and acts of vandalism. If your business has a physical space that you use for commercial activities you can benefit from commercial property insurance.
  • Home-based business insurance isn’t usually classified as its own coverage option; instead, most home insurance providers classify it as an add-on that you can purchase in addition to your standard coverage. Home-based business insurance adds a small amount of general and product liability to your home insurance packages for business owners who operate out of their primary residence.
  • Some insurance providers offer a comprehensive business owner’s policy package that includes most of the types of coverage listed above. Business owner’s policies make buying liability and property coverage a little simpler, and you can often get a discount on multiple coverage types by bundling. These policies can be particularly useful for small businesses and home-based businesses.

How Much Liability Insurance Do You Need?

Your specific liability insurance needs will depend on your individual situation.

Consider the Type of Plan

For Auto Coverage

Every state sets its own individual minimum requirements for auto liability insurance.

While it’s possible to purchase only your state’s bare minimum coverage, keep in mind that if you don’t have enough insurance to cover the entirety of the damage you cause during an accident, you can be sued for the remainder that your insurance doesn’t cover. This means that it’s usually a good idea to carry more insurance than is required by state laws.

For Business Coverage

The type of liability insurance you need depends upon your business structure — if you manufacture and sell products, professional liability insurance will be of less use to you than a business that only provides services and employs a large number of service professionals and contractors.

You can consider carrying two types of protection: general liability insurance to protect you against legal action and defamatory or libelous claims and either product liability insurance or professional liability insurance, depending on your industry.

Keep in mind that if your state has determined that your industry must carry liability insurance, you can be fined or even shut down if you’re caught operating without insurance. It’s a good idea to talk to a business insurance professional to determine your individual needs before you commit to a plan.

Consider the Cost

Like the specific plan you need, how much you’ll pay for liability insurance depends upon how much coverage you need.

For Auto Coverage

Every insurance provider uses its own unique formula when determining how much you’ll pay for auto liability insurance.

Though the average American pays about $1,426 for his or her auto coverage, your insurance company will look at factors like your age, your driving record, your gender and sometimes even your credit score when they decide how much coverage it will extend you and how much you’ll pay in a deductible and monthly premium.

For Business Coverage

Business liability insurance is usually less expensive than auto liability insurance. The average small business owner pays about $741 for general liability insurance but half of all business owners pay between $400 and $600 for their coverage.

As your coverage increases, you can expect your monthly premium to increase as well. Assess your business insurance needs at least once every year — as your business grows, you hire more employees, and your company becomes more highly valued your insurance needs (and your liability) can increase.

How to Get Liability Insurance

Most major insurance providers offer both business and auto insurance options. If you already have homeowner’s insurance, life insurance, or another type of coverage, a great place to start your search for car or business liability insurance is to contact your current provider.

Many companies offer discounts when you bundle multiple types of insurance together and if you haven’t filed a claim with your current provider, you may be more likely to secure a lower rate than average.

Because every insurance provider uses an individual formula to determine insurance rates, it’s possible to get the exact same coverage from ten different providers at ten different prices. Don’t be afraid to “shop around” for your insurance by gathering quotes from multiple insurance providers. Most insurers now offer free quotes online and can lay out your options in as little as a few minutes without forcing you to visit a physical location.

The Best Liability Insurance Companies

Check out the top 3 companies and get a quote from each to compare prices.

1. Best Overall: Hiscox

Hiscox is the 1st insurance carrier in the U.S. to offer small business insurance. With its small business-only focus, it’s a top choice as a workers’ comp insurance provider.

It assists small companies across the nation get started with workers’ comp policies by assessing the needs as businesses begin hiring employees. It offers a monthly payment option with no added fees and gives a 5% discount rate for bundling business policies such as a business owner’s policy, cybersecurity policies and general liability insurance.

Based in Chicago, it consistently has excellent AM Best ratings.

2. Most Affordable: biBERK

Berkshire Hathaway’s biBERK provides small business owners a straight-forward, cost-effective workers’ compensation insurance. biBERK takes the middleman out of the fray so you get insurance straight from the source. According to its website, you’ll likely save up to 20% on costs. Plus, you’ll save time from the get-go with its easy online quote tool and claims process.

Finally, as the inimitable Warren Buffett leads Berkshire Hathaway, you can rest easy knowing that biBERK inherits the experience, stability and dependability from its parent.

3. Best Programs: Progressive

Progressive offers one-stop shopping for workers’ compensation insurance through their Progressive Advantage Business Program. This program offers small businesses an array of insurance solutions underwritten by specially chosen carriers.

Getting a quote is easy online through our partner or live on the phone with a trained expert. The specially trained experts help ensure tailored insurance coverage to match your needs.

Getting Your Car or Business Covered

Keeping your car or business protected safeguards you, your family and your livelihood against financial devastation. If you’re interested in learning more about getting your vehicle covered, check out our article on the best car insurance providers who currently insure new policyholders.

Frequently Asked Questions

1) Q: How long can an employee stay on workers’ compensation?

1) Q: How long can an employee stay on workers’ compensation?

The length of time that an employee can remain on workers’ compensation is set by the state. Usually, the range is from 3 to 7 years. In addition to that, there is generally not a limit for permanent disability benefits unless you live in a state that terminates the benefits at age 65. For employers seeking the cheapest workers’ compensation insurance, check out these top providers.


2) Q: Who pays for workers’ compensation benefits?

2) Q: Who pays for workers’ compensation benefits?

The employer is responsible for purchasing workers’ compensation insurance to cover the benefits of employees. The must pay a monthly premium based on class code and payroll. To get a custom workers’ compensation quote, click here.


3) Q: Do I have to get workers’ compensation insurance?

3) Q: Do I have to get workers’ compensation insurance?

This depends on which state you have employees. The following states require workers; compensation under specific requirements: AK, CA, CO, CT, DE, HI, IL, IA, KS, KY, MD, MA, MI, MN, MS, NH, NJ, NY, NC, OH, OK, SC, SD, UT, WA. To get the best workers’ compensation premium, enter your zip code here.


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