Among the many types of insurance policies out there, liability insurance is one that tends to cause a lot of confusion among consumers and professionals alike. Ask any non-expert certain questions like who needs liability insurance, what it can protect you from, and how to get it, and you’re likely to get a whole bunch of different answers. And if you’re planning to work in certain fields, understanding liability insurance on a deep level is not simply a good idea – it will be a fundamental requirement for surviving in your market.

How It Works

The general idea about commercial liability insurance is to protect yourself in case something goes wrong in the course of performing some kind of service. The damage may or may not be physical – for example, an auto mechanic messing up a repair and breaking their customer’s car, or an accountant getting their client’s taxes wrong and incurring penalties from the IRS for them. Liability insurance is designed to protect professionals against these incidents – within reasonable limits, of course – and to give them some peace of mind in performing their duties. If something does go wrong, the client still gets compensated – but by the insurance company and not out of the professional’s own pocket. 

Who Needs It?

As you’re probably guessing, anyone who provides a professional service where there is a risk of causing monetary damage to their clients needs to have liability insurance. Sometimes, operating under a certain legal form will provide you with liability protection by default – it’s why so many people like to set up LLCs. Even that’s not a perfect shield against having to pay for your mistakes out of your own pocket though, so liability insurance is something you will want to look into in any case. It’s a good idea to start investigating this field before you’ve even set up your company in the first place, as there are various implications to observe here.

Different Types of Liability Insurance

The most important detail to pay attention to are the different types of liability insurance policies and their implications for your business. General liability, as the name implies, protects you against most types of mishaps, but at the cost of offering less specialized coverage for particularly bad situations. If you’re selling a physical product, you should also look into product liability insurance. This might also be necessary for virtual goods in some cases as well, e.g. software that could potentially damage a user’s data.

Many inexperienced entrepreneurs make the grave mistake of ignoring the issue of liability insurance until they actually need it. And as you’re probably guessing, at that point, it’s far too late to do anything anymore. That’s why this is something you should take care of early on, and ensure that you pay attention to any changes in your local insurance market that could have implications on you. Take steps to align yourself with the new situation as best as possible because it’s not rare that new insurance products come out which work much better for the needs of specific professionals.