What Does Commercial Liability Insurance Cover?

Commercial liability is one of the most common business insurance policies available.
Commercial liability is one of the most common business insurance policies available. (Image: Jupiterimages/Comstock/Getty Images)

Businesses can protect their financial interest by purchasing commercial liability insurance. Commercial liability insurance policies cover several areas that companies are at risk for suffering financial losses. Insureds are financially assisted by insurance companies to fight such claims in court. This policy is often combined with other business plans to provide companies an umbrella of coverage.

What Is Commercial Liability Insurance?

Commercial liability insurance is a business policy that protects a company from financial responsibility when claims are made against it from injured third parties. Some of these claims include negligence, slander and copyright infringements. This type of insurance is considered the most basic insurance plan and most likely the only policy purchased by businesses, according to TechInsurance. However, commercial liability coverage is generally bundled together with other coverages, such as property insurance, to create what is called a business owners policy, or BOP.


Commercial liability insurance pays claims or judgment awards levied against the insureds up to the policy’s coverage limit. Insurers also help insureds who are challenging claims in court by covering their legal costs as well as replacing their lost incomes for their time away from work. Medical expenses of the injured parties are also covered by commercial liability policies.

What's Covered?

There are myriad incidents that commercial liability insurance policies cover. These include bodily injury, property damage, employee injuries, advertising and personal injuries. Contractual and liquor liability coverage are afforded by commercial liability policies as well. The actions of the insureds’ employees as well as any independent contractors or vendors that are conducting business on the company’s behalf are also covered under these policies.


Companies pay insurance premiums as consideration for insurance coverage. Insurance rates are determined by the information submitted on applications including the companies’ business industries, coverage amounts applied for and its claims history. If insurance companies decide the risks of the applicants are higher than normal, they will charge them increased premiums prices. Also, the insureds would have to satisfy a deductible before insurers pay for claims.


Although commercial liability insurance policies are optional purchases, companies expose themselves to many risks that can jeopardize their operations. Without coverage, companies are liable for paying all claims made against them out of pocket. They are also responsible for paying for their own legal aid, which can cost thousands of dollars. These financial obligations can be very expensive and cause companies to go bankrupt.

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