Even if your business has excellent safety standards, accidents and injuries can still occur. Without the right liability coverage, mishaps and mistakes could result in hefty losses for your company. Fortunately, there are a wide variety of business liability insurance options available in the market. This article will cover four kinds of coverage that are essential for shielding your company from unnecessary losses.

1. Product Liability Insurance

Product liability coverage provides coverage for any lawsuit that results from injuries, illnesses, or property damage that affects those who buy and use your company’s products. Injuries and damage can result from manufacturing errors; faulty designs; and the malfunctioning or misuse of both complex products, such as heavy equipment and machinery, and simpler and seemingly innocuous ones, such as a toy soldier.

Products with manufacturing flaws can lead to injury. For example, a manufacturing error could leave a nail exposed on a pogo stick, which could lacerate a customer's foot or leg. Such an injury may lead to a lawsuit that results in your company paying out significant amounts in damages. In these kinds of product liability cases, product liability insurance steps in to offer financial protection.

2. Professional Liability Insurance

Professional liability insurance (also known as errors and omissions insurance in certain fields, like real estate) provides protection for your business in the event that an error or omission your company makes results in losses for a client.

It's important for any company or business professional to have this type of coverage. Any negligence, error, or omission—whether intentional or unintentional—can lead to substantial losses for a client. If this occurs, your company could be facing a major lawsuit.

Imagine the following scenario. You run a consulting firm and one of your business professionals offers bad advice to a client. That client ends up suing the company for $10 million in damages as result of your mistake (for more information on what happens if you are sued, see Insurance and Lawsuits). For circumstances like this, professional liability coverage is a real saving grace.

3. Commercial General Liability Insurance

Commercial general liability insurance protects your company from lawsuits due to injuries or illnesses sustained by non-employees on your company premises or ones caused by your employees on your clients’ premises. This type of coverage is especially important if many people come to your company premises on a regular basis, as happens, for example, with retail stores.

If something goes wrong—say one of your employees left water on the ground after mopping and a customer slipped and broke their hip—this could result in a big lawsuit. Even if you have a highly safety-oriented property, or even an open space with very few obvious hazards (think of a car dealership's showroom, for instance), accidents can still happen. When they do, general liability insurance will provide financial protection.

4. Umbrella Liability Insurance

This type of coverage differs from the previous ones insofar as it doesn't provide financial protection for a specific type of liability. Instead, umbrella liability insurance provides a broad form of coverage designed to insure against risks that aren't covered by your other liability insurance policies due to technicalities or other reasons. It is especially useful for companies with unusual risks that are unlikely to be covered by other standard policies.

Another important feature of umbrella liability is that it can provide additional coverage in an area that may already be covered by another policy. In this way, it can act as supplemental coverage once a loss exceeds the limits of the main policy. For example, if you are facing a product liability lawsuit of $2 million and your product liability policy only covers $1.7 million, you would have to pay the remaining $300,000 out of pocket. However, if you have umbrella liability coverage, it would kick in to cover the excess amount up to its coverage limits, thereby limiting what you must pay on your own.

Conclusion

Liability insurance policies can significantly decrease potential losses in the event of a lawsuit. Even if your business is making a substantial profit, getting sued can still put you in hot water if you are not properly protected. Product liability insurance, professional liability insurance, general liability insurance, and umbrella liability insurance can go a long way toward protecting your company from various financial risks.