The 8 Most Popular Questions about Liability Insurance
Written by
Marty Agather is the Vice President of Client Experience for TrustedChoice.com. He started his insurance career by filling multiple roles over a 10-year span in a mid-sized independent agency in Chicago, Illinois. Marty also writes for various insurance magazines and blogs and co-hosts a weekly podcast at AgencyNation.com.
These days there seems to be an insurance policy for everything. There have never been more choices available to consumers, which can create a confusing landscape. Liability insurance is one of the most necessary kinds of protection, but there are so many types of liability insurance, and many people want to learn more about what they're buying.
What is third party liability insurance?
What are the types of liability insurance?
What are car insurance liability limits?
How do I get a certificate of liability insurance?
Do I need liability insurance?
What are some examples of liability insurance?
Where can I get liability insurance?
What is liability insurance?
In its simplest form, liability insurance protects policyowners against lawsuits stemming from injury or property damage. The purpose of liability insurance is to avoid paying out of pocket when you are responsible for causing someone injury or property damage.
What is third-party liability insurance?
Third-party liability insurance coverage helps pay for damages, losses or injuries that may be inflicted on another party as a result of the actions of the policyholder. It is referred to as third-party liability insurance because the coverage deals with the well-being of parties other than those covered by the policy or the insurance company. You are the first party. The insurance company is the second party. The person who was injured or experienced property damage is the third party.
What are the types of liability insurance?
Liability insurance can be divided into two broad categories: Personal liability coverage and commercial liability coverage.
The three most common types of personal liability insurance coverage are often included in your auto, home or rental insurance policies. The liability coverage offered in these insurance policies protects you if someone is injured or experiences property damage while at your home or apartment or due to a vehicle crash.
There are many types of commercial liability insurance. Some of the most common include:
- General liability insurance: The most basic form available to businesses. It protects against lawsuits and helps pay for damages or injuries to third parties.
- Product liability insurance: This is for manufacturers or producers of goods. This policy protects businesses in the event their product causes damage or injury.
- Professional liability insurance: These policies help professionals such as doctors (called malpractice insurance), attorneys, consultants and others who may be held responsible if their services or advice lead to injury or damage.
- Cyber liability: This is an increasingly important protection for any business that digitally collects, stores or transfers customer data. It can help protect businesses if their website is hacked or customer data is leaked in any other way.
What are car insurance liability limits?
Many people are more familiar with liability coverage when it comes to their car insurance. This is the portion of your car insurance policy that helps pay for injuries or property damage sustained by another driver or person. It can also help you pay for court fees in the event you are sued.
Each state has its own liability insurance law that dictate how much of this particular coverage you need in order to legally operate a vehicle on public roads. These liability insurance limits vary from state to state, but most require you to have a minimum liability coverage. However, minimum liability may not be sufficient to protect you in the event of a crash. Many states have not updated their insurance liability laws in decades. Meanwhile, medical and vehicle repair costs have greatly increased. This often means the state minimum liability limits are not enough to fully protect you in the event of an accident.
Once you reach your liability limit, you are responsible for paying any remaining costs above your policy benefits. Higher liability limits may increase your car insurance costs, but those higher premiums are a fraction of what you could owe if you cause another driver injury or damage their vehicle.
How do I get a certificate of liability insurance?
Commercial liability insurance holders receive a certificate of liability insurance, which works much like the proof of insurance you are given for your auto policy. Your insurance company should be able to tell you how to get a certificate of liability insurance.
This proof is often required in order to win contracts. This way, your potential client can know for sure whether you have business insurance. Many companies and individuals that hire contractors need to know that they won’t be held liable for damages, injuries, or substandard work, and therefore require that you have insurance.
Do I need liability insurance?
If you drive a car, own a home, rent an apartment or operate a business, you require liability insurance, and perhaps more than one form of it. The question isn't really whether you need it or not, but what the liability insurance limits you need are and what your liability insurance requirements are.
You can choose the liability limits on several of your insurance policies. These limits will cap the amount your liability insurance provider will pay in the event you need to file a claim. These costs can include medical bills, property repairs, and court fees should you be faced with a lawsuit.
What are some examples of liability insurance?
Your homeowners policy most likely includes liability coverage. If someone is injured on your property, you can file a liability insurance claim on your policy. Your insurance company can help pay for any medical treatment required.
Similarly, your car insurance also includes liability coverage. If you crash into your neighbor's fence while driving to work, this coverage can help them pay for the repairs.
On the commercial side, say your company makes widgets. One of these widgets malfunctioned and caused a fire in a consumer's home. Your product liability insurance policy will help you pay attorney and court fees if the customer sues your business. It can also help pay the settlement so the injured party can repair the fire damage.
Where can I get liability insurance?
Now that you know how liability insurance works, it’s time to find the right policy or policies. A local Trusted Choice® agent can help analyze your risks and recommend the liability coverage limits needed to protect your home, auto, business and other assets. Get started by contacting an independent agent today.