Glossary of Business Insurance Terms
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Liability insurance

Liability insurance is defined as a form of insurance that provides protection from third-party claims and lawsuits. If you’re held liable for causing a person or company’s damages, injuries, or losses, your insurance will cover some legal expenses.

How liability insurance protects your business

Liability insurance is a generic term that describes various types of business liability insurance that cover third-party lawsuits.

If a person or company believes you caused an injury or property damage and files a lawsuit to recover losses, your liability insurance can pay for your legal costs up to your policy limits.

Liability insurance protects your assets by paying for legal expenses, such as:

  • Attorney’s fees
  • Settlements (the amount you agree to pay in return for the plaintiff dropping the lawsuit)
  • Judgments (what a judge or jury orders you to pay after you lose your case)
  • Administrative court fees
  • Expert witness fees
  • Direct payments to the plaintiff for medical care and property repair
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Who needs business liability insurance?

If you own a small business, then it’s a given you need liability insurance. That’s because a large lawsuit can result in judgments or settlements that may put you out of business.

Some businesses need liability insurance more than others. This includes businesses that:

  • Have customers or visitors frequently in their facility
  • Work with or train customers on dangerous equipment
  • Work at customer job sites
  • Rent commercial space from a landlord who requires a certificate of insurance
  • Provide professional and consulting services
  • Have customers who request a certificate of insurance before signing a contract
  • Hire employees
  • Use business vehicles

Companies in the following industries need liability insurance:

What are the types of liability insurance?

Liability insurance eligibility requirements

Liability insurance is widely available in the insurance marketplace as a key component of many types of business insurance coverage. It is easy to qualify for as long as your business doesn’t: 

  • Engage in high-risk activities
  • Have a history of frequently filing liability insurance claims

Assuming your business can pass an insurance company’s underwriting requirements, you will likely be eligible for the liability insurance you’ll need to keep your risks at bay.

Find business liability insurance with Insureon

Insureon helps small business owners get commercial insurance quotes from A-rated U.S. insurance companies with an easy online process. Start a quote today to protect your business against liability claims from third parties.

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Updated: January 19, 2024
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