What is liability insurance?

There are many different types of liability insurance contracts available on the market today, but what is liability insurance? This page will give you a breakdown of a range of the liability insurance policies that are often a mandatory requirement in both personal and business situations. This is a free and comprehensive guide for you to consider before you go ahead and foot that liability insurance cost for yourself or your business. We will also provide some useful definitions such as a public liability insurance definition so you know exactly what these liability insurance policies are all about. We have covered from the most common types of liability insurance such as personal liability insurance and business liability insurance to more niche types such as wedding liability insurance and nursing liability insurance. With our examples for each type of liability insurance policy you will find that this is liability insurance made easy!

If you are looking for general liability insurance for a small business or public liability insurance for self employed people please see our dedicated pages.

Liability insurance definition

The plain and simple liability insurance definition is that it is a type of insurance policy that protects you or your business (the insured party) against any potential loss due to your liability for any damage or injury that is caused to others. The insured in the case of any liability insurance policy will be the responsible party and they are responsible for only the losses of the other party.

That was the basic overall answer to the question 'what is liability insurance?', for a more accurate answer on each type of liability insurance please see further down the page.

The liability insurance cost will vary depending on what type of liability insurance it is that you take out and the level of cover it is that you require. It is vital to remember that if you are taking out any type of liability insurance that the policy has to be in force and covering you before an incident occurs from which you may wish to make a claim. Many people make the mistake of waiting until they are liable for something and then think that taking out a liability insurance policy will save them, it really won't I'm afraid!

Here are two quick examples of liability insurance:

Business A has a liability insurance policy in place to protect their business against loss, injury or damage to their clients. One of Business A's employees is working on a client's property and breaks a window. Business A is responsible for this damage and will be protected by the liability insurance policy when the clients initiates a claim.

You are driving along when you mobile phone goes, you pick it up (tut tut you really shouldn't in any case) and this momentary lapse of concentration causes you to shunt into the back of the car in front. Personal liability insurance will cover you for the damage and potential injury you have caused to the other driver and their car as you are responsible for the accident.

Now that we have answered the main question 'what is liability insurance?' let's move on and list the types of liability insurance policies that there are and their definitions.

Business liability insurance definition

Business liability insurance is a mandatory requirement for each and every business out there and no matter how careful you are or as tight a ship that you run, it is always possible that one day you will be liable for loss, injury or damage to a client or their property. This can result in a lawsuit and the potential cost of this could sink your business unless you have adequate business liability insurance in place. Such a claim could occur in a number of different circumstances so it is vital to have the cover in place to protect you and your business because even if you are deemed by a court as free of blame following a lawsuit you will still have had to pay defense costs and the whole process can often be very time consuming. In the worst case scenario where you are deemed responsible you could be liable to pay millions and lose some or all of your assets. Business liability insurance cost is fantastic value considering the huge sums of money that you will be covered for. We hope that this has helped answer what is liability insurance for businesses. Another important aspect of business insurance is employers liability insurance if you have people working for you. We explain this further down the page.

It is also well worth knowing that the most basic type of business insurance is general commercial business insurance and this is explained below.

Business liability insurance example: A customer comes in to your office to speak to you about a business quote and they slip on a wet floor that has not been signposted, they hurt their ankle and have to go to hospital. This accident happened on your business premises and you are responsible, the customer will make a claim against you and your business liability insurance policy will cover you for the costs.

For information on general liability insurance for small business please see our dedicated page.

We also have a page specifically for public liability insurance for self employed people.

General liability insurance definition also known as Commercial general liability insurance

Here we have a general liability insurance definition for you. Commercial General liability insurance is a more basic and comprehensive insurance policy for your business. Each and every day you and your business face certain liabilities, some obvious and some not so obvious, never the less they are still a danger. The best form of protection for your business and it's assets is commercial general liability insurance. Commercial general liability insurance covers any claims against you that have resulted in injury or damage to a third party or their property. This type of liability insurance policy is commonly provided with property insurance in order to protect your business against any such occurrence on your own premises or any other locations where you would carry out business. A commercial general liability insurance policy will help your business to carry on functioning whilst it faces dealing with any genuine or bogus claims that may have occurred due to any such errors as outlined above. If a customer was ever injured on your premises you would be in for a potentially huge claim that could finish your business if you were found to be liable, commercial general liability insurance is vital to ensure you have protection against any such claims.
Other than asking 'what is liability insurance?' as far as commercial general liability insurance you may also ask what exactly does it cover, well the four main aspects that this type of liability insurance will cover are:

• Advertising injury - Covers the cost of damages done in the course of spoken or written adverting that disparages, libels or slanders another person's or organization's goods, products or services.
• Personal injury - Covers your and your business against any negligent acts and/or omissions which result in libel, slander, invasion of privacy, or false arrest suit, against a third party.
• Bodily injury - Physical harm that may come to a client or third party caused by your business or it's employees.
• Property damage - Damage to the property of a third party caused by your business or it's employees.

We hope that this has answered the question 'what is liability insurance?' in relation to Commercial general liability insurance.

Personal liability insurance definition

A basic personal liability insurance definition is a policy that protects an individual or a family against any civil law claims that may arise against them due to any injury or damaged caused to a third party by them form any act of negligence. Accidents can and do happen and if you are held responsible for any such accidents it is likely that a claim will come your way. It is common for personal liability insurance to come as part of a homeowners insurance policy to protect the insured from any accidents that may take place on their own premises.

Personal liability insurance example: You kids have friends over and they are running around in your house playing hide and seek, one of the friends trips on some shoes left on the stairs and falls down injuring themselves. It is possible that the parent may wish to make a civil law claim against you for medical costs that this injury incurs. Personal liability insurance will cover any such claim.

Professional liability insurance definition also known as Professional indemnity insurance

The service that you provide to your clients or patients is specialised and goes beyond their level of comprehension and what you do is of high importance and sensitivity to them or their business, however mistakes can and do happen. The risk that a mistake can happen leaves you open to litigation which is why it is imperative to have professional liability insurance in place.

The most straight forward professional liability insurance definition is an insurance policy that is put in place by professional practitioners in order to protect themselves against any claims that may arise form clients or patients due to any possible acts of negligence, misrepresentation, being treated unfairly, inadequate advice or a violation of good faith. Depending on what type of professional you are may depend on what type of professional liability insurance it is that you need as this can come under several different names, for example 'Errors and Omissions insurance' of 'Medical Malpractice insurance'. Any insurance agent you speak to or insurance provider website that you use will make it clear which type of professional liability insurance is applicable to your profession.
This type of insurance is usually taken out alongside business liability insurance and general liability insurance which will cover the more physical requirements of a claim such as damage to property or injury to a client or patient.

Professional liability insurance example: You are an IT professional called in to fix a problem in a company's computer system network. You make an error that loses them vital data and damage their system. You are responsible for this damage and the cost that will be incurred to the company for having all of the data restored and the system amended.

Please also see our page on general liability insurance for small business.

Employer's liability insurance definition also known as workers compensation insurance

Here we are going to provide you with an employers liability insurance definition. Employers liability insurance or as it also commonly known, workers compensation insurance is a policy that will cover any expenses for your employees that may arise from any illnesses related to work or injuries that may be sustained while working for you. Such expenses are usually medical or disability expenses. If you have people working for you then it is a legal requirement to have employers liability insurance in place. One of the key aspects of workers compensation insurance is that it protects your business in case an employee of yours make a claim that they sustained an injury that was a result of your company providing an inadequately safe workplace. Any such claims can run into millions with legal costs included and a could sink your business, there can be limits to each aspect of employers liability insurance that you must take out, for example the contract may state that amounts of no less than $500,000 will be provided per claim for an accident causing bodily injury. This will be made clear when you are applying for a policy through an insurance provider.

Employers liability insurance/workers compensation insurance example: You own a scaffolding business and a high rise scaffold has not been set up correctly and there is a secure rail that an employee leans on and subsequently falls off of the rail to the ground sustaining injury to themselves. The work place was not safe and the result was an injury to one of your employees, your employers liability insurance policy will protect you against the imminent claim.

Wedding liability insurance definition

Wedding liability insurance is something that is well worth taking out ahead of your big day. Weddings do not come cheap and the average wedding in the USA costs little under $30,000 so making sure that money is spent wisely and safely is of paramount importance. Wedding liability insurance protects against losses that can occur when any of the vendors that you use for one of the many aspects of your wedding goes out of business before the big day when you would actually use the services, for instance the venue that you have hired for your reception or the store that you have hired suits or dresses from. Like any other type of insurance wedding liability insurance is peace of mind just in case you are let down up to and including the last minute! Some of the key aspects of wedding liability insurance are covering against postponement due to illness or injury to a vital member of the wedding, third party companies that you have paid or hired that go out of business and do not return deposits or full payments or who do not turn up. We hope that this has answered the question 'what is liability insurance?' with regard to wedding liability insurance.

Wedding liability insurance example: A couple have hired a venue for their wedding reception and just a few days before the wedding is due to take place they go out of business and are unable to hold the reception or return any of the money that has been paid. A wedding liability insurance policy will be a safety net so that you don't lose out on the money paid.

If you want information on wedding ring insurance or engagement ring insurance please see our dedicated page.

Nursing liability insurance definition

When you are in the field of nursing it is critical that you have nursing liability insurance in place in order for you to carry out your job. Nursing liability insurance is in fact a type of professional liability insurance and will often come under the name of medical malpractice insurance. It is often the case that any nurses service organisation that you may be a member of will be able to assist you in obtaining the correct nursing liability insurance. As a nurse it is possible that you can be sued at any time and for any reason. This is not even to say that the reason that you are being sued is bona fide, but being implicated in any sort of lawsuit can be costly and also very distressing. Your reputation can be severely damaged no matter the outcome, even if you are completely cleared of any blame! Your employer may have a liability policy that covers you but this may only be up to a certain amount or for certain things. It is your responsibility to make sure that you have a nursing liability insurance policy in place that covers you for everything that you need to be covered for as your employers policy will be tailored to protect them first and you second! It is possible that there will be limits to your employer's liability insurance policy which may not totally cover you so by having your own nursing liability insurance you can ensure that you can cover any costs that may arise from a claim against you or that you can share the costs with the employer's policy.

Nursing liability insurance example: You are working in a hospital and treating a difficult patient who falls out of bed and injures themselves. There is nobody around to witness this but you and the patient claims that you caused them the injury and reports you to the hospital before trying to sue you for damages.

Legal liability insurance definition

When you are running a business it is very important that you have legal liability insurance in place. A lawsuit can come out of the blue at any time and in current times for almost any reason whether this is genuine or somebody trying to take advantage of an opportunity. These lawsuits generally stem from some sort of negligent behavior by your business or it's employees and can come at huge costs that could be too much for your business to be able to afford. A simple daily job by your business and it's employees may be seen as improper by clients or even employees themselves, whether this is genuinely the case or not, and this could lead to them taking legal action against you, this is where legal liability insurance comes to your rescue. Legal liability insurance will guarantee financial protection if you are forced to pay any damages following a lawsuit and also pay for any defense fees that may be incurred, even if you are deemed innocent. Legal liability insurance can come under a commercial general liability insurance policy too so can be an even cheaper liability insurance cost than being taken out on it's own. We hope that we have adequate explained what liability insurance is in relation to legal liability, please now look at the following example.

Legal liability insurance example: A customer of your business claims that one of your employees stole something from their house whilst they were there carrying out some work. They are going to take this to court in order to sue your business. Legal liability insurance will cover the costs of the lawsuit and any claim that you may be forced to pay from the outcome including legal expenses.

Liquor liability insurance definition

Liquor liability insurance is one of the many types of business insurance that is purchased in order to protect your business from any claims that may arise from injury or damaged caused due to liquor being served at a venue such as a bar function or wedding. It is possible to obtain liquor liability insurance that covers against damages caused by your employees who are under the influence and injury themselves or other people. This can even result in the loss of life which you can also be liable for so lawsuits that arise can be very expensive and the liability insurance cost on liquor liability insurance policies will reflect this. We hope that this has answered the main question 'what is liability insurance?' in relation to liquor liability insurance, please now take a look at an example.

Liquor liability insurance example: A customer is served alcohol despite showing clear signs that they have had too much and they then cause aggravation at the venue that ends in a fight and injury to a third party. A liquor liability insurance policy will protect the bar owner from the lawsuit that is going to come their way.

Umbrella liability insurance definition

Umbrella liability insurance is plain and simply a type of liability insurance that can be taken out by both companies and also individuals to protect them against any claims which are above the amounts that they are covered for on their main insurance policies or for any claims that they are not currently covered for. It is kind of like a top up insurance policy so when the cover on your main policies have been used but you are liable for more then this can be claimed against the umbrella liability insurance policy. Umbrella insurance is relatively cheap considering it can add millions to your policy, a very effective liability insurance cost. That may sound a lot but in current times lawsuits are taken out for crazy money and if you are found liable then you may find your main liability insurance policies just don't cover the costs that you have to pay, umbrella liability insurance is the solution! Now that we told you what liability insurance is in relation to umbrella liability insurance we will now provide an example.

Umbrella liability insurance example: Mr Suarez was sued following an accidental tackle that he made in a soccer match where he broke another player's leg. Although the tackle was not malicious the opponent decided to sue Mr Suarez for personal injury. Mr Suarez was covered for this under the personal liability aspect of his homeowners policy the amount that he was liable for exceeded that payable on his policy. However, he had an umbrella liability insurance policy in place and this covered him for the difference of the total legal and claim expenses.

Directors' and officers' liability insurance definition

Directors' and officers' liability insurance is taken out in order to cover directors and officers in a company against any claim that may arise from damages caused by actions they undertake as part of their duties and responsibilities. If any of these directors and officers are believed to have acted inappropriately by accident it is possible that a claim can be made for compensation or a lawsuit be taken out against them that a directors' and officers' liability insurance policy will cover. This act could be fraudulent, a breach of the data protection act or not carrying out the required health and safety procedures. Any act deemed to have been deliberate may not be covered by the directors' and officers' liability insurance policy.

Special event liability insurance definition

A special event can be anything from a birthday party to a wedding or a dog show to a music concert, such events can be attended by a few people or even thousands of people, even tens of thousands! Special event liability insurance is there to make sure that any even that you organize is covered in case the unthinkable happen. No matter how good you are at making things run like clockwork you never can tell when something can come up and get in the way of your plans and spoil your even before it has even started, this is where special event liability insurance can come into play and save the day. Aspects that special even liability insurance policies cover include, personal injury, liquor liability, advertising damage, machinery coverage, rented equipment coverage and much more. Never think something can't go wrong, you can never foresee what other people are going to do at an event or what the weather is going to be like. For more information on special event liability insurance please see our special event insurance page.

Product liability insurance definition

Product liability insurance provides your business with protection against any injury that may occur to a member or members of the public that is caused by a product that you manufacture, sell or even give away. If your name is on the product you are liable! Product liability insurance can also come under commercial general liability insurance policies.

Product liability insurance example: A clothing manufacturer sells a t-shirt which is coloured with a dye that irritates a consumers skin. The consumer has to go and see their doctor and this leads to them having to take time off work and losing money. Product liability insurance will cover the manufacturer against any claim that may result from this.

Medical liability insurance definition

Medical liability insurance is essentially professional liability insurance and also nursing liability insurance also known as medical malpractice insurance. Anybody in the medical trade can put this insurance in place in order to protect them from any claims that may be made against them for errors on their behalf for example. A lawsuit can be something that is very expensive and although your employer may well have their own insurance, more often than not this cover will be designed to cover their own backs before yours. Medical liability insurance can be taken out by those that work for a medical establishment or even on their own freelance basis, however the principle is the same, medical liability insurance is there to cover you in the even of somebody making a claim against you or your actions. Medical liability insurance is suited to physicians and other medical professionals and it can be illegal to work in some states without cover or at least a basic level of cover.

We hope that we have been able to answer the main question 'what is liability insurance?' in a variety of cases. In order to ascertain liability insurance cost please visit a price comparison website, the insurers website directly or alternatively speak to an insurance agent.

Please also see our dedicated page to general liability insurance for small business and also our page on types of business insurance.