Advice on Buying Liability Insurance

Audrey M. Jones
Insurance and the Law

Liability insurance coverage protects policyholders from claims based on negligence. Coverage normally kicks in when inappropriate actions result in bodily injury or property damage.

Liability Insurance Explained

Liability insurance can cover the costs of damages, attorney fees, and any other costs associated with negligence-based lawsuits that may be filed against you. Liability insurance does not cover claims based on employment practices, intentional acts, or a breach of contract.

There are several types of liability insurance. Some of the most common include:

  • Automobile liability insurance comes in two types: bodily injury or property damage. The first covers bodily injuries or death if you are responsible for causing an accident, while the latter covers the damage your car inflicts on another person's property.
  • Commercial general liability insurance covers liability claims for bodily injury or property damage that occurred on commercial premises. It may also cover slander and other similar claims that arise out of a commercial enterprise's normal course of business.
  • Employers' liability protects a business in the event an employee alleges that an employer's negligence caused an injury or illness.
  • Umbrella liability coverage kicks in when all other insurance policies have been exhausted as a result of liability claims. These policies are available to individuals and companies.
  • Professional liability protects against claims that the policyholder would be obligated to pay as a result of an error in professional work, such as nurse's professional liability insurance.
  • Worker's compensation insurance pays medical and disability claims that result from an illness or injury that occurred while on-the-job. This type of coverage is required by law in most states.

Obtaining Liability Coverage

The first step to obtaining liability insurance is to determine what type of insurance coverage you need. If, for example, you need professional liability insurance, you can narrow your search to companies, agents, or brokers that offer this type of insurance. You can search for liability insurance online or you can contact an insurance agent or broker.

Insurance Companies

Dozens of insurance companies sell policies directly to individuals and companies. Many times, these companies allow individuals to apply for coverage online. In 2013, Insure.com published an article identifying the best insurance companies, a few of which are listed below. Additionally, some of the companies below have high ratings by AM Best, a company that offers ratings for the insurance industry:

  • United Services Automobile Association (USAA): This insurer offers auto liability, umbrella insurance, and also offers insurance to small businesses to members of the military, veterans, and eligible family members. This company was ranked as having quality customer service and claims management.
  • Allstate: This large insurance company offers a variety of insurance products, including business insurance. It is ranked one of the highest based on Insure.com's finding of the high number of customers who would recommend the company.
  • Auto-Owners Insurance: This company, which writes policies in the East, Midwest, and portions of the South of the country, offers auto liability insurance. Its customer service is identified as some of the best.
  • Geico: This company offers general liability insurance. Coverage under this policy includes payments for damage to property and defending against lawsuits.
  • Liberty Mutual: This insurance company offers personal umbrella insurance coverage.

Brokers and Agents

An insurance agent only works for one company, while a broker can provide policy quotes from several different companies. Both must be licensed.

The website of the Independent Insurance Agents and Brokers of America allows users to search for insurance agents or companies located nearby. Many state's insurance departments also offer search engines on their websites that allow users to find licensed insurance agents, brokers, or companies.

Considerations when Purchasing

There are numerous considerations for purchasing a liability insurance policy. The type of coverage and limitations you seek will affect what questions you should ask and factors you should consider. In general, when purchasing liability insurance, inquire into:

  • Coverage amounts and limitations: Is there a maximum amount of coverage that the policy pays? If so, what happens after you meet that amount?
  • Types of coverage provided: Some policies will pay for the cost of litigating a claim, while others only pay the amount of damages awarded to a party.
  • Policy length and terms: How long does the policy last and is it renewable at the end of that period?
  • Premium and deductible costs: How much you will have to pay and when those payments are due is a major consideration for most individuals purchasing insurance.
  • State minimums and other legal requirements: An auto policy or a policy to protect a commercial enterprise may need to meet state minimums to be valid.

Choosing your Policy

In addition to providing different types of coverage, liability insurance policies come with different coverage amounts and premium costs. Some policies can be personalized to meet your needs. Make sure you purchase the coverage you need without buying additional coverage for which you have no use.

Advice on Buying Liability Insurance