Skip to content
× FreshBooks App Logo
FreshBooks
Official App
Free - Google Play
Get it
You're currently on our US site. Select your regional site here:

What is Business Insurance?

  1. BAP
  2. Business Insurance
  3. Commercial Health Insurance
  4. Business Liability Insurance
  5. Cafeteria Plan
  6. QSEHRA
  7. Maximum Foreseeable Loss
  8. BPPCF
  9. Employers Liability Insurance
  10. E&O Insurance
  11. Transfer Of Risk

Save Time Billing and Get Paid 2x Faster With FreshBooks

Try It Free ➝

Business Liability Insurance Overview

Updated: November 25, 2022

What do you think is the most important part of operating a small business? There can be lots to consider as a small business owner. You need to balance everything from generating revenue to keeping expenses down.

But sometimes things can happen that are out of your control. So what are you supposed to do in these situations? Are the financial interests of your business protected? What if a third party files an expensive lawsuit? Do you have to foot the whole bill yourself?

Not necessarily. Business liability insurance helps to protect your interests and keep you in business. But are you still not sure where to start? Don’t fret. We put together a guide that covers everything you might need to know.

Keep reading to find out more about business liability insurance and some of the main types. You can continue to run your business with extra peace of mind.

List IconTable of Contents


    KEY TAKEAWAYS

    • Business liability insurance helps protect the financial interests of your business. 
    • There can be a few different types of business liability insurance. These include professional liability, general liability, and employer’s liability. 
    • Policies can cover things like legal defense costs, punitive damages, and compensatory damages.

    What Is Business Liability Insurance? 

    Business liability insurance helps protect the financial interest of you and your business. It helps to protect a business from a variety of claims. This includes bodily injury, property damage, or advertising injury. Any direct financial liabilities you incur can be covered with a policy. For example, a third party might bring a lawsuit against you. 

    As well, policies can also cover other things. This could include any expenses you have for a legal defense. There are also a few different types of business liability insurance to consider. These can include: 

    • Professional liability insurance 
    • General liability insurance 
    • Business property insurance
    • Product liability insurance 
    • Employer’s liability insurance 
    • Commercial auto insurance 
    • Cyber insurance
    • Commercial insurance
    • Accident insurance
    • Business interruption insurance
    • Comp insurance
    • Inland marine insurance
    • Trucking insurance
    Hit The Ground Sprinting

    Why Is Business Liability Insurance Important? 

    If someone brings a lawsuit against your business, your personal finances can also be at risk. And if you are a sole proprietorship or a partnership you can be even more at risk. This is because there is no legal separation between you and your business. 

    For example, let’s say that a customer comes into your store and slips and falls. If it happens on your property then they can file a lawsuit against you. Or, you could even have an employee that sustains an on-the-job injury. 

    A business liability insurance policy will help protect your business assets. It can also cover some of the medical costs of the injured customer or employee. Here are some of the most common things business liability insurance can cover: 

    • Legal defense costs
    • Settlement offerings
    • Mandated awards
    • Compensatory damages 
    • Non-monetary losses
    • Punitive damages 

    Lawsuit costs can add up quickly. A liability insurance policy is going to help protect all your financial interests. This way, you can make sure that you can cover the legal costs but also keep operating. 

    Some industries can also have other types of liability that might need to get covered. This can include a commercial real estate property company, for example. In this case, they might different coverage types for things like: 

    • Mold damage 
    • Fire damage 
    • Flood damage 
    • Catastrophic damage 

    Types of Business Insurance 

    Different types of business insurance can cover things like legal fees, court-ordered judgments, and settlements. But the amounts covered can’t exceed your coverage limits. Either way, there are a few different types of business insurance that can offer extra coverage. 

    General Liability Insurance

    This type of policy is going to protect your business against third-party risks. These can include things like property damage or a bodily injury claim from business customers. There can be coverage for advertising injuries, product defect lawsuits, and copyright infringement

    Set Your Books Up For Success

    Employer’s Liability Insurance 

    Employer’s liability insurance is usually included in worker’s compensation insurance policies. It’s meant to protect your business if an employee files a lawsuit. For example, they could claim an injury happened due to negligence. 

    Professional Liability Insurance 

    Depending on your industry, professional liability insurance can be called something different. It can commonly get referred to as errors and omissions insurance. Or it could be known as malpractice insurance. This type of policy covers the legal costs if a client sues you. 

    Commercial Auto Insurance 

    Does your business own and operate a fleet of commercial vehicles? Even if you only have one or two, commercial auto insurance will help pay for liability claims. These claims could come from a lawsuit if your business vehicle gets into an accident. 

    Summary

    Taking out business liability insurance for your company can be incredibly important as a small business owner. You might not think anything will happen, but having a policy in place will add a high level of protection. Different types of policies are designed to protect the financial interests of your business. 

    There can be a few different types of business liability insurance. These include professional liability, general liability, commercial auto insurance, and employer’s liability. 

    These policies will cover things like legal defense, third-party claims, and settlement offerings. Business liability insurance is a great way to have peace of mind. Especially if you are running a high-risk business. This way, you can focus your valuable time and energy on running your business. 

    Fresh Starts Deserve FreshBooks

    FAQs About Business Liability Insurance

    How much is business liability insurance?

    How much business liability insurance costs will depend on a few different factors. The type of business that you operate can get taken into account as well as your industry. It will also depend on the level of coverage you need and the policy limits. 

    Do you need business liability insurance for your small business?

    The most important thing to consider is where your business is located. Some states mandate liability insurance depending on the industry, like the construction industry. That said, some clients and mortgage companies might require liability insurance.

    How do you get a business liability insurance policy?

    The best thing you can do is contact your insurance company. Ask about policy limits and coverage. You will typically need a few pieces of basic information. These can include the business name, type of operations, and how many employees you have. 

    What if you need more liability coverage for your business?

    Commercial umbrella insurance can be a way to extend general liability insurance coverage. This can be due to your business having high risks or revenue. You can increase your maximum policy limit to cover expensive lawsuits. Check with your insurance provider to get more details. 

    What’s the difference between professional liability and general liability insurance?

    Many businesses need to take out general liability insurance policies. If your business provides extra professional services, professional liability insurance can be helpful. General liability covers customer property damage and injuries, and advertising injuries. Professional liability insurance covers certain professional disputes. 

    WHY BUSINESS OWNERS LOVE FRESHBOOKS

    553 HRS

    SAVE UP TO 553 HOURS EACH YEAR BY USING FRESHBOOKS

    $ 7000

    SAVE UP TO $7000 IN BILLABLE HOURS EVERY YEAR

    30M+

    OVER 30 MILLION PEOPLE HAVE USED FRESHBOOKS WORLDWIDE

    Try It Free for 30 Days. No credit card required. Cancel anytime.