Do I Need Liability Insurance?
Individuals and businesses purchase insurance to protect personal and business property. Insurance is also necessary for legal protection. Liability insurance pays for legal claims made against an individual or business that causes injury or harm to another party. Although liability insurance is optional in some cases, most individuals and business professionals purchase liability insurance for additional protection.
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Registered Vehicles
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Automobile liability insurance is mandatory in all U.S. states for all registered vehicles. To register a vehicle, car owners must show proof of liability insurance or financial responsibility. Some states allow a vehicle owner to purchase an insurance bond in lieu of buying auto insurance.
Automobile liability insurance pays for medical expenses and property damage caused to another party in an at-fault accident. The coverage is classified on a per-person, per-accident basis. For example, minimum liability insurance limits in the state of Arizona are $15,000 per person for bodily injury, $30,000 per occurrence for bodily injury and $10,000 per accident for property damage liability.
Property Owners
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Homeowners need liability insurance for protection against legal claims. Renters need liability protection as well. The coverage is designed to cover legal costs, bodily injury and property damage property owners cause to another party. Homeowners and renters insurance policies automatically include minimum limits for liability coverage. Policy-holders may elect additional liability coverage based on their individual needs. Liability limits typically begin at $100,000 and may be increased to $1,000,000 or more. Higher limits are often necessary for individuals who own multiple properties because of the increased liability exposure.
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Business Professionals
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Business professionals must purchase liability insurance. Professionals such as physicians, attorneys, insurance agents and architects purchase professional liability insurance in case the services they provide cause their clients to suffer physical or financial harm. Doctors, for instance, must maintain malpractice insurance to practice medicine in most states. Insurance agents purchase errors and omissions liability insurance in the event they fail to include pertinent coverage in an insurance policy or make an error in issuing a policy. It is important to note that negligence does not have to be actual but can be perceived. If a client perceives loss or harm, they have grounds for a liability lawsuit.
Business Owners
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For business owners, liability insurance is a necessity. According to the U.S. Small Business Administration, adequate insurance could make the difference between having to close your business after a disaster or continuing to operate. While state governments determine insurance requirements for businesses, liability insurance is mandatory for some business types. For example, business owners who use commercial vehicles in their day-to-day operations are typically required to purchase commercial auto liability insurance.
There are several liability options for business owners. General liability insurance covers legal claims if a business is sued for negligence. The policy will pay legal fees and court costs as well as payments to the other party for medical expenses and pain and suffering. Product liability is necessary for businesses that sell or manufacture products. This type of liability coverage protects the business in the event a defect in the product causes the user harm or injury.
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