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What Is Liability Insurance and Why Should You Care?

The world of business is filled with technical jargon and terms that would dazzle anyone.

‘Liability’ is one of the most confusing terms because of how vague it is and the uncertainty of who it applies to. The word liability simply means “the state of being legally responsible for something” – a definition which is as unclear as the word itself because it doesn’t determine the parties involved.

So this article will be a simple one that demonstrates what liability insurance is, why you should care, and break it down into simple terms that almost anyone can understand. Running a business doesn’t have to be complicated—you just need the right resources to help you along the way.

Liability Insurance – The Parties Involved

Business liability generally protects your assets and covers the costs involved if your employees or machines hurt someone or something. It covers costs such as medical fees and also the costs associated with hiring a lawyer.

For instance, if you repair computers for other companies, then you are required to have general liability insurance in the event that one of your employees accidentally breaks or damages a computer in the process. If you work as a freelancer performing repairs for clients, then you need to have liability insurance to protect your business from being sued in the event that you break something that doesn’t belong to you. This is especially true if you enter into any type of contract with your clients, such as if you’re performing construction work or repairs to a home.

What Type of Coverage is There?

The type of coverage to aim for will depend on your needs and also your budget. Liability insurance rates change drastically depending on the type of coverage you need, and it will alter depending on the risks associated with your business. If you’re a contractor that works in dangerous environments, then you are required to pay more for liability insurance due to the nature of your work. There’s a chance you could injure yourself, damage the building you are working on, or even hurt a client.

In contrast, working as a designer from the comfort of an office space is going to carry significantly less risks and, as such, your liability insurance rates will be incredibly low.

Protecting Your Business From Customers

Most of the time, your business is going to be liable for damages that you or your employees have caused. However, there are also times where a client does something that causes a problem but tries to shift the blame onto you. In this case, you need to have liability insurance in order to help pay for a legal team that will defend your case and ultimately save your business.

Let’s imagine that you repair a set of computers for a client. It’s paid for, it’s a job well done, and the client is happy. However, the client accidentally downloads a file that locks up one of the computers and shifts the blame onto you, blaming your lack of competence. In this situation, it’s important to have liability insurance so that you can protect your business from clients that are in the wrong but are trying to blame you for their own faults.

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