Why do companies need liability insurance coverage?

By Insureon Staff

Liability insurance not only protects your business and personal assets in the event of a lawsuit but also is often required for business contracts.

Commercial Liability Insurance
(Photo by Getty Images)

Click here to request a General Liability Insurance Quote

Small business owners should consider liability insurance coverage for a number of reasons. Not only is it an affordable way to protect your business and personal assets in the event of a lawsuit, but you will also likely need company insurance for important business contracts.

When is liability insurance needed?

Many companies sign up for insurance as soon as they start doing business. That’s because the moment you start doing business, you could be held legally liable for any mishaps that happen on your business property, including your home office.

Also, business contracts often require insurance. A client might want you to have errors and omissions coverage before you sign a contract, or a condition of your commercial property lease could stipulate general liability insurance before you move in. If you have employees, you’ll need to meet your state requirements for workers' compensation insurance.

Each of the company liability insurance policies listed protects you from having to pay for a lawsuit out of pocket. Continue reading to learn more about common liability insurance policies and what they cover.

What liability insurance does a company need?

Sole proprietors, small businesses, and partnerships generally consider a combination of the following liability insurance policies:

General liability insurance

This covers third-party lawsuits (those coming from people outside of your company), including slip-and-fall accidents, product liability, property damage to third parties, and reputational damages.

Professional liability insurance (also known as errors and omissions insurance)

This covers lawsuits over professional mistakes, missed deadlines, or problems with the quality of your work that cause a financial loss.

Workers' compensation insurance 

This covers medical costs and partial salaries of employees injured at work. It also provides liability protections to employers.

Employment practices liability insurance 

This protects your small business from employee disputes over discrimination, harassment, unpaid overtime, and other employment issues.

Cyber liability insurance

This provides important protection if your business experiences a cyberattack or data breach.

Is company liability insurance the same for different business types?

Depending on your business’s structure, there might be variations in your coverage needs. For instance, workers' compensation laws in some states do not require LLCs to have coverage for business partners, and larger corporations may need policies with higher coverage limits than liability insurance for smaller companies or sole proprietorships.

When you fill out an application, you will be asked to provide specific details about your business to determine coverage requirements for where you do business and your needs.


Original article shared here:

Proudly offering General Liability insurance in Davison, Burton, Flint, Fenton, Beecher, Flushing, Grand Blanc, Swartz Creek, Linden, Mount Morris, Clio, Argentine, Genesee, Michigan.

329 N State Rd, Davison, MI 48423

(810) 653-2602

  • Grey Facebook Icon
  • Grey Google Places Icon

CA License: 0G47886

We use cookies to personalize and enhance your experience on our site.  Visit our Privacy Policy to learn more. By using our site, you agree to our use of cookies, as well as our Privacy Policy and Terms of Use.