LIABILITY INSURANCE
Liability insurance protects the insured against the claims where the insured is the guilty party – when the insured is Liable for the damages.
Liability is your “Sorry, My Bad” insurance.
Liability insurance covers both:
- Damages, and
- Legal costs
Liability insurance can be Mandatory or Voluntary.
Mandatory Liability Insurance
An example of a mandatory liability insurance coverage is in Auto Insurance. All US states require a minimum amount of auto insurance coverage, in order to protect the public from you – the driver. That is why these minimums are usually for LIABILITY coverage. The state can’t make you purchase full coverage protection for your vehicle. If the car is still being financed, the bank will have a requirement for full coverage. But after the car is paid off, the owner gets to decide: to keep full coverage or maintain the state-mandated Liability-only.
Just like with all insurance, you get to ask a key question:
“If I don’t have this type of insurance and something happens – then what?”
In some cases Liability can be preferred to Full Coverage due to a very high price difference.
For example, most motorcycle owners prefer to purchase bikes with cash (and usually pre-owned), simply because they do not want to be forced into Full coverage mandated by the financing bank. (you can read more about Motorcycle Liability here)
Mandatory Businesses Liability insurance can be also required for some professions, depending on the state’s laws:
- Professional Liability Insurance (also known as Errors and Omissions (E&O) insurance) protects professionals from potential lawsuits, over a mistake or something that the professional does, that causes financial losses to the client. The term Professional means any person or business that sells its expertise or service. The common E&O lawsuits can be over: Incomplete work, Undelivered services, Missed deadlines, Breach of Contract, Negligence, Work errors, etc.
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- Some states require malpractice insurance for medical and legal professionals. Malpractice insurance is a form of the Professional Liability Insurance.
- If you plan to sell alcohol, the state would require that you get and maintain a Liquor Liability License. It covers the bar and restaurant owners from lawsuits over any property damages or personal injury caused by their, likely drunk customers.
- If you have an airplane, or own an airline company, you are mandated to purchase Aircraft Liability Insurance and Passenger Liability Insurance. Both of them protect others from your actions.
- Commercial transportation companies on land, sea, and air are required to carry liability coverage.
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Voluntary Liability Insurance
While voluntary Liability insurance is just that – voluntary, there are certain types that are advisable:
Professional Liability insurance. Here is a list of professions that most commonly get PLI as a choice:
- Accounting professionals
- Architects
- Engineers
- Consultants
- Real estate agents
- and Insurance professionals
- Similarly, if you own a business near or on the water, you will need liability insurance too. The type of policy depends on what your business does.
- Marine General Liability (MGL) protects you from the property damage and bodily injury claims specifically near the water. It is usually purchased by marine contractors, charters, ship repair shops, etc.
If you own a boat or plan to rent one – at the very least you want to get Boat Liability Insurance. So, if you cause damage or injury to someone – you are covered.
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- If you employ staff on the boat, then you will need Maritime Employers Liability
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Landlord Liability insurance (also known as Lessors Risk). Lessor Risk insurance protects the landlords from liability claims about their properties. It is commonly purchased by the building owners for retail centers, warehouses, apartment buildings, retail shops, etc. The common claims for lessors risk policy are:
- Theft
- Slip, trips, and falls
- Weather damage
- Smoke damage
- Vandalism
- Windstorms, and more.
Cyber Liability insurance protects organizations from the results of data breaches and cyber attacks. It helps covering the cost of the recovery work and the cost of lawsuits from the affected clients and partners. Cyber Liability Insurance can be also referred to as Data Breach Insurance, Cybersecurity Insurance, or Cyber Risk Insurance,.
There are a lot of specialty types of Liability Insurance. If you have further questions, please reach out to your trusted insurance agent.
Alternatively, you can always reach out to us with your question. We will either research it and post it, or link you up with someone who knows the subject really well. You decide.
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