The term ‘liability’ implies the loss incurred by a person (either physical loss or monetary loss) due to the negligent action of another person.

Irrespective of whether you are an entrepreneur, with a small business set-up of your own, or whether you are the owner of a multinational company, you definitely need business liability insurance in order to protect yourself and your business against third party demands and claims. Business liability insurance prevents you from being held responsible for any kind of liabilities.

It pays the damage costs on your behalf to the third party, thereby saving you a lot of money. It also covers for the damage cause to your own employees or your clients, as well as to trespassers, who may have been injured on your property. Business liability insurance also covers your legal costs (in case a someone files a lawsuit against you for any form of damaged caused to them); and the medical costs (including the hospitalization charges, treatment costs, medicine bills, compensation for the unpaid days, as well as rehabilitation costs to a person who has suffered physical damage due to your business). However, intentionally caused damages are not covered under the business liability insurance.

There are 3 different types of business liability insurance –

General liability insurance, (also called commercial general liability) is a must for all types of businesses and shields you against any form of liability such as claims of damage to property, advertising claims, or claims of injury caused on your business premises. It covers the claims of injury that are caused to either your clients, or your own customers on your company’s property, irrespective of whether they made an authorized or unauthorized entry into your premises. It also covers the injury claims made by the company’s employees not only on the business premises, but also anywhere outside, where they may have gone on a business related task.

Professional liability insurance is the next kind of business liability insurance that professionals in the field of banking, dentistry, plastic surgery, or medicine must be equipped with, in order to protect themselves from the numerous professional liability risks. Even stock exchange brokers, environmental consultants, financial advisors, and other professionals, who serve the public in some way or the other, are also expected to have professional liability insurance in order to cover for their professional errors and mistakes, negligence, or malpractice charges. Many governments, mostly in the developed nations of the world have made it compulsory for professionals to obtain professional liability insurance before they start practicing their business.

The third type of business liability insurance is the product liability insurance, which is meant for those businesses, which either manufactures of sells any products. The product liability insurance covers the liabilities such as damage caused to your property (home, asset or vehicle) after the use of the product sold by your company; or physical injury (food poisoning, explosion, electric shock, etc) caused due to the use of your products. The coverage costs depend on the risk potential of your product and the extent of damage caused.