What are the Different Types of Liability Insurance and What it Covers?

It’s not easy being an entrepreneur! If you’re the owner or manager of a business, whether big or small, we’re sure you know what we mean. Many aspects of running a business, from the products and services it offers to its location(s) and employees, can expose the company to lawsuits that can lead to significant financial losses. Could your business survive this kind of ordeal?
Discover the different types of liability insurance

Don’t panic! That’s why we’re here. With the right liability insurance, you’ll be protected against lawsuits filed by your customers for material, bodily or financial damage.

The three main types of liability insurance

1. General Liability Insurance

This type of protection isn’t only for companies. In fact, it’s one of the components of any home or car insurance policy.

In a business context, this insurance protects you against costs incurred for bodily injury or property damage suffered by third parties on the premises of your business or caused by your products or services. For example, if someone gets hurt on your company’s premises and decides to sue you because it’s alleged that the incident was due to your negligence, expenses arising from legal proceedings (defence or investigation costs) would be covered by your liability insurance.

Start-up or big corporation, it's better to be covered!

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2. Professional Liability Insurance (Errors and Omissions)

Professional liability insurance, sometimes referred to as Errors and Omissions or Malpractice insurance, is intended for firms that offer professional services, such as lawyers, accountants, architects, engineers, healthcare or beauty professionals. This coverage protects you against fault or negligence resulting in bodily injury or financial loss. It also covers the expenses incurred by the insured in the event of prosecution, such as legal representation costs and compensation paid to the plaintiff.

3. Insurance for Directors and Officers

People in charge of a business are subject to specific responsibilities, especially when the company is investigated for actions related to the environment, corruption or unfair competition, or cases of tax evasion, bankruptcy or prosecution. Officers are also responsible for their own actions and are required to act in a fair and diligent manner, in the best interest of their business. Directors and Officers Liability Insurance covers policyholders against any financial consequences arising from their activities as managers.

What type of liability insurance applies in the following cases?

1. An accountant responsible for preparing a company’s financial statements makes an error in estimating the value of the company’s properties. The company’s executives sue the accountant at fault.

ANSWER: Professional Liability Insurance

2. A chiropractor injures a patient during treatment for back pain. The patient is hospitalized and remains disabled for several months. The patient claims a large sum of money from the chiropractor.

ANSWER: Professional Liability Insurance

3. While visiting their psychologist, a patient slips on the doctor’s freshly washed stairs. The patient claims damages from the psychologist.

ANSWER: General Liability Insurance

4. Following the closure of a business, some laid-off employees claim several months of wages from their former employer.

ANSWER: Directors and Officers Liability Insurance

How to find the right coverage?

Now that you’re a pro at liability insurance, make sure you have the right protection for your business. Use our online quote tool. or contact your broker to find out what type of coverage best meets your needs.