What does liability insurance cover? Types, examples and which coverage matters most

Liability insurance coverage can help protect your business if someone says you caused an injury, damaged their property or triggered certain legal actions. But not all liability insurance covers you the same way. And depending on if you’re looking to protect your home, your car or your business, finding the right policy is essential. And you don’t want to pay for coverage that you don’t need. While general liability insurance is the most popular type of liability coverage, it’s just the tip of the iceberg — especially if you own a business. Keep reading to unpack two dozen different types of liability coverage for your home, office, car, business or rental property.

Liability insurance coverage explained

Liability insurance is a broad term for a type of insurance coverage that can help protect a person or business if they’re accused of causing harm to someone else. That harm could include bodily injury, property damage or certain legal costs tied to a claim or lawsuit. Instead of covering those expenses entirely out of pocket, liability insurance may help homeowners, business owners or vehicle owners cover some of the costs.

There are two main categories of liability insurance policies:

• Personal liability insurance. Common products include homeowners insurance, renters insurance or personal auto policies.
• Business liability insurance. This is coverage designed to address the risks that come with running a business, such as legal issues, causing damage to other people’s property or medical costs for someone hurt at your place of business.

What does General Liability insurance cover?

General liability insurance, sometimes called commercial general liability insurance or public liability insurance, is one of the most common types of coverage for small businesses. In fact, when people ask what liability insurance covers, this is usually the policy they’re talking about.

This coverage is especially relevant for businesses that work with customers, vendors or the general public. It’s also often used by businesses with a physical location or who work at job sites. This could be anything from welcoming customers into a storefront to doing work at a client’s home or office.

This type of coverage is commonly used to help manage everyday business risks to anyone who’s not your employee, such as customer slip-and-fall injuries (often called bodily injuries in insurance) or accidental damage to someone else’s property during normal business operations.

In addition to bodily injury and property damage, general liability insurance may also help with some personal or advertising injury claims.

What does liability car insurance cover?

Liability car insurance can help cover some costs around bodily injury or property damage you cause to others in a vehicle accident. The type of coverage you need depends on how the car, truck, trailer or other vehicle is used.

• Personal auto liability insurance generally applies when a vehicle is used for non-business activities, such as commuting or personal errands. It typically doesn’t cover accidents that happen while driving for business.
• Commercial auto liability insurance is designed for vehicles that are owned, leased or regularly used by a business. Commercial auto coverage can help cover injuries or property damage caused to others while driving for work, such as traveling between job sites or making deliveries.
• Hired and non-owned auto liability insurance, also called HNOA coverage, may help when employees or business owners use rented vehicles or personal vehicles for business-related driving.

What does renters liability insurance cover?

Renters liability insurance may help cover injuries or property damage caused by the policyholder in a rented home or apartment. It typically applies to a guest being injured on premises, but it usually doesn’t extend to business activities that operate inside the rental.

This type of coverage is usually bought by renters who want financial protection. Some landlords may require tenants to carry this policy before they’ll allow a renter to sign a lease.

What does Professional Liability insurance cover?

Professional liability insurance can help cover claims related to professional mistakes, errors or negligence that end up costing a client money. This is often required or sought after for individual business owners or any small business that sells their advice or expertise rather than physical products, such as consultants or financial professionals. In some professions this type of liability insurance is called errors and omissions insurance, or E&O insurance.

If a client makes a legal claim against you because you missed a deadline and this action caused them a financial loss, professional liability insurance/E&O may help cover your legal defense costs or settlements tied to that claim.

This type of liability insurance is a type of business insurance, but it’s separate from general liability coverage since it focuses on professional services rather than physical injuries or property damage.

Learn more about the difference between general liability insurance vs. professional liability insurance.

What does business liability insurance cover?

Business liability insurance is a broad term for multiple types of coverage designed to help protect businesses if they’re accused of causing injuries, property damage or certain other legal claims connected to their operations.

Business owners across many industries buy liability insurance to help manage financial risk and meet contract or client requirements. Coverage details vary based on the type of policy and what the business does.

What does personal liability insurance cover?

Personal liability insurance typically helps cover claims if someone is injured on your personal property, or if your home or apartment is damaged from non-business activities. Common examples include a visitor slipping and getting hurt in your home or you causing accidental damage to a neighbor’s belongings. This type of coverage is usually included as part of homeowners, renters or condo insurance policies.

What does Cyber Liability insurance cover?

Cyber liability insurance can help protect business owners against some costs related to data breaches, cyberattacks and digital security incidents. The need for this type of business insurance coverage has increased as more businesses store sensitive customer data digitally, such as health information, financial data or contact information.

Cyber liability insurance may help with:

• Data breach response costs
• Compromised customer or employee data
• Ransomware or cyber extortion-related expenses

What does Employers Liability insurance cover?

Employers liability insurance helps cover certain claims made by employees who are injured or become ill because of their job. It’s typically included as part of a workers’ compensation policy and can help if an employee sues the business for damages beyond what workers’ compensation provides.

This type of coverage is usually carried by businesses with employees and is used to help manage legal costs and settlements tied to work-related injury or illness claims.

What does directors and officers liability insurance cover?

Directors and officers liability insurance, called D&O for short, usually focuses on business insurance coverage for leadership decisions. This can include allegations that company leaders made poor financial decisions, mismanaged the business, or failed to meet legal or fiduciary duties.

D&O insurance is commonly purchased by corporations, nonprofits, startups, and growing businesses with a board of directors or executive leadership team. It’s often used to help protect company leaders — and the business itself — from the financial impact of lawsuits related to how the organization is run.

What does homeowners liability insurance cover?

Homeowners liability insurance (also called home liability insurance) can help cover some costs around physical injuries or property damage that happen on your personal property or as a result of your actions. For example, it may kick in if a guest is injured in your home and they’re faced with medical bills.

This type of coverage is typically included as part of a homeowners insurance policy and is often required by mortgage lenders. To be clear: homeowners liability insurance is different from homeowners property coverage, which typically applies to damage to your home or belongings from events like fire, theft, storms or vandalism.

What does property damage liability insurance cover?

Property damage liability insurance refers to coverage that may help pay for damage you cause to someone else’s property. In a business context, liability insurance can often help cover costs if you or your employees damage a customer’s property while working, such as breaking an item in a client’s home or causing damage at a rented space.

The term is also used in personal insurance, such as auto or homeowners policies in non-business situations. In either case, property damage liability coverage is designed to help cover repair or replacement costs instead of paying entirely out of pocket.

What does bodily injury liability insurance cover?

Bodily injury liability insurance generally refers to coverage that can help with costs when you physically injure someone else. The way it applies depends on whether the injury happens in a business or personal setting.

In a business context, bodily injury liability is typically part of general liability insurance and applies to injuries suffered by non-employees, such as customers, clients or the general public. For example, if you put your toolbox down on the sidewalk while loading your van and a jogger trips and breaks an arm, liability insurance can help cover medical expenses, legal defense costs or settlements related to the injury.**

If an injury involves your own employees, bodily injury claims are usually handled through workers’ compensation insurance, not general liability.

What does Liquor Liability insurance cover?

Liquor liability insurance can help cover certain claims if a business is blamed for alcohol-related incidents, such as injuries or property damage caused by an intoxicated customer. This type of coverage is commonly purchased by businesses that make, serve, or sell alcohol, including restaurants, bars, food carts, caterers and event venues. In many cases, liquor liability insurance is required by state law or as part of a liquor license agreement.

What does excess liability insurance cover?

Excess liability insurance, sometimes referred to as a type of umbrella insurance, isn’t a standalone business liability policy. Instead, it provides additional coverage limits on top of existing liability policies, such as general liability insurance, once the primary policy’s limits are reached.

Because it “extends” general liability, excess liability insurance applies to the same types of claims, but only after the underlying coverage has been used. Businesses with higher risk exposure, larger contracts or client requirements for higher coverage limits often purchase this coverage.

What does fiduciary liability insurance cover?

Fiduciary liability insurance could help cover claims related to managing employee benefit plans, such as retirement or health plans. This type of coverage could be bought by businesses that offer employee benefits and have fiduciary responsibilities under federal or state regulations.

Businesses may opt for fiduciary liability insurance to protect themselves and the people managing their benefit plans. These legal claims are usually tied specifically to how benefits are handled, not everyday business operations, so they’re usually not covered by other types of liability insurance.

What does Product Liability insurance cover?

If you’re a retailer or run your own shop — this includes Amazon sellers, e-commerce and physical stores — you could be held liable if a product you’ve made or sold causes an injury,  illness or property damage.

Sometimes the products people buy from a business can end up causing them physical harm or property damage. Think about a beauty cream that unexpectedly burns your skin, or a can of paint that explodes when you open, splattering your carpet and couch beyond repair.

For situations like this, business owners often carry product liability insurance to help cover them if a claim is made about their product. It can assist with some costs if a business makes, distributes or sells something that someone says is defective or dangerous. Even if an accusation is unwarranted, it could help cover the legal costs to defend your business.

What does Employment Practices Liability insurance cover?

Employment practices liability insurance, more commonly referred to as EPLI, is business insurance coverage that could help protect a business owner if legal action is taken against them for how employees are treated at work. This coverage could help protect people who run a business from claims around wrongful termination, discrimination, harassment or retaliation.

This type of coverage is often an add-on to general liability insurance policies. It’s common coverage for the food and beverage industry, retail stores, offices, cleaning and janitorial companies, and contractors and construction trades.

What does liability insurance cover if you’re not at fault?

Even if your business is found not at fault for an accusation, a legal defense can still be expensive. Liability insurance can help cover attorney fees, court costs and some settlements or judgments related to a claim.

For business owners, this can come up in situations like:

• A customer alleging they were injured on your premises
• A client claiming you damaged their property during a job
• A client accusing your business of giving incorrect or harmful advice — even if the claim turns out to be unfounded

Personal liability coverage can work in a similar way. Common incidents that could happen in your home or involved your personal activities include:

• A guest claims they were injured in your home
• A neighbor alleges you caused damage to their property
• A driver files a claim after an accident involving your personal vehicle

Liability insurance may help with defense costs, even if you’re not ultimately responsible.

What’s not usually covered by liability insurance?

Liability insurance can help with many common claims, but it doesn’t cover everything. Some risks are outside the scope of both personal and business liability coverage.

In general, personal and business liability insurance usually don’t cover:

1. Damage to your own property or buildings. Liability insurance is designed to cover damage to other people’s property. Damage to your own home, apartment, tools, equipment or inventory is typically handled through property insurance, such as homeowners, renters, or commercial property insurance.
2. Intentional or illegal acts. Claims involving deliberate wrongdoing or illegal activity are commonly excluded from both personal and commercial liability policies.
3. Employee injuries or illnesses. If you have general liability coverage for your business, this covers non-employees who suffer an injury at your place of business. But you and your employees are typically not covered by general liability for work-related injuries or illness. These types of scenarios are typically handled through workers’ compensation insurance instead — a requirement in most states if you have employees.

How ERGO NEXT helps small business owners with liability insurance

ERGO NEXT makes it fast, easy, and affordable to get business insurance for your small business — all online.

We’ll ask a few questions about your business and help you understand your liability coverage options, from general liability to other types of liability insurance that may apply to your work. You can review your options, choose the coverage that fits your business and buy a policy in about 10 minutes.

Once you’re covered, your certificate of insurance is accessible 24/7. You can also manage your policy anytime through our website or mobile app.

And if questions come up along the way, our licensed, U.S.-based insurance professionals are here to help.

Start a free quote with ERGO NEXT.