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Sarah Haun Property & Casualty Specialist, Advanced Insurance Designs View bio
Scott
Scott Halbrook Agent, Farmers Insurance View bio

This guide was written by

Brian O’Connell

An unexpected accident or mishap can quickly derail anyone’s path to financial stability. Just one wrong move, and you could find yourself paying a big settlement to cover someone else’s injuries or losses.

That’s where good liability insurance can help. Liability insurance protects you or your company against claims from accidents, damage and harm to people and property. With the right plan, victims will get their rightful compensation while leaving your assets intact.

Where to Find Liability Insurance Quotes

To find the best liability insurance rate quotes:

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Check with your insurance carrier.

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Go online and visit major insurance company sites (GEICO, Nationwide and Progressive, for example, all offer liability insurance quotes.)

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Visit an aggregator site like eInsurance.com, which offers quotes from a host of liability providers.

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Discuss your findings with your agent, since the best deal isn’t necessarily the cheapest.

What Type of Liability Coverage Should I Get

Liability insurance generally boils down to two main categories: personal liability coverage (minimum and umbrella coverage) and business liability coverage (general business liability insurance, professional liability insurance and commercial umbrella coverage).

Personal Liability Insurance Types

Personal liability (minimum)

If you have an auto, homeowners or renters insurance policy, you already have some liability coverage. In fact, you have to have one to get umbrella (extra) liability coverage. Why would you want extra coverage? Unfortunately, minimum liability requirements may leave you unprotected in the event of a catastrophic accident: $50,000 worth of coverage for an auto accident or $100,000 worth of home liability coverage seem like a lot – until someone has an accident that cost $500,000 to a million of more. That’s where an umbrella policy comes in (see below).

Personal liability (umbrella)

Extra coverage that “sits” on top of your other insurance, umbrella insurance kicks in when your liability coverage ends. Say you have a liability policy for $500,000 and an umbrella policy for $1 million, and you are sued for $1.5 million. After your regular policy pays $500,000, your umbrella policy will kick in the extra $1 million. Your insurance company will help you fight the charges in court and will pay for any rightful damages, up to the policy’s liability limit.

Umbrella insurance typically covers injuries, property damage as well as slander and libel claims and other damages anywhere in the world. According to TrustedChoice.com, even an extra $380 per year can provide $1 to $2 million in umbrella coverage. “An umbrella plan is the best deal in insurance,” says Scott Halbrook of Montclair, Calif., who has worked as a Farmers Insurance agent for 14 years. “For little more than $350 bucks a year, you can have worldwide protection.”

Keep in mind that personal umbrella insurance has exceptions. You likely won’t be covered if you were on the job when the incident happened (see professional liability coverage) or if you intentionally hurt someone or damaged their property. Ask your agent about any other exclusions. (For more on personal liability insurance, see our guide to personal liability insurance.)

Business Liability Insurance Types

General liability coverage

“If someone comes into my office and trips and falls, general liability coverage is what protects my business,” says Halbrook. If you own your own business, general liability insurance will shield you from the cost of litigation for injury and property damage, as well as out of court settlements and court judgments. (It doesn’t pay for injuries to employees, though, since those as covered by workers’ compensation insurance.)

Professional liability

If you’re a professional who gives expert advice or treatment, such as a doctor, nurse, counselor, lawyer, CPA, pastor, or consultant, consider professional liability insurance. Also known as errors and omission insurance (E&0), professional liability insurance typically covers negligence and errors – or even claims of errors when none were made. If you get sued for negligence or faulty advice, professional liability insurance coverage can cover legal fees and any awarded damages. Payouts are only made on incidents that occurred when the policy was active, however, so policy owners should keep their coverage updated to ensure uninterrupted financial protection. Prices depend on specific insurance needs, but the average yearly cost for professional liability insurance is around $985 according to Insureon.

Commercial umbrella coverage

Small or large business owners should consider commercial umbrella coverage if they need more coverage but can’t afford much higher premiums (it’s more cost-effective to buy umbrella insurance). You may also want umbrella coverage if you rent vehicles or employ drivers, if you operate in an industry plagued by lawsuits, or if you work with high-earning partners who might sue for lost wages if they were injured on your property.

How to Apply for Liability Insurance Coverage

Here’s a step-by-step guide to getting liability insurance coverage:

document Get your documents in order

Even though most liability insurance applications take under 15 minutes to complete, it helps to know what information you’ll need to complete your application. For personal liability, you’ll have to provide basic information such as your address and social security number. If you’re looking for professional liability insurance, you’ll have to report business revenues, number of employees, and specific business risks. You should also expect to provide any information on previous insurance claims and report whether you’ve been rejected for coverage.

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umbrella Figure out how much liability insurance coverage you’ll need

Insurance companies will have minimum coverage mandates, so figure out how much liability insurance coverage you can afford. If it’s still not enough, you can always hike your policies deductible to afford a budget-friendly liability insurance policy. Plus, umbrella policies tend to be relatively cheap.

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response-laptop Go online for faster application responses

Some insurance providers are streamlining the liability insurance process. Geico, for example, offers a simple three-step process to get a liability insurance quote. Or, use aggregators like eInsurance.com to get multiple liability insurance quotes, at one time.

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pro-talk Talk to a professional

If you don’t already have an agent, try an independent agent who represents multiple carriers. That’s the advice of Sarah Haun, property and casualty insurance specialist at Advanced Insurance Designs, Inc., in Barberton, Ohio. “Find an agent by contacting a local insurance agency,” she said. “They’ll gather information regarding your business, what you do, how long you’ve been doing it and any other business specific information the carrier requires in order to complete the quote. The agent will then acquire quotes from the carriers they represent.”

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Financial professionals generally advise policy holders to aim for a personal liability insurance plan that approximately mirrors the policy holder’s net worth (or more). In other words, if you’re net worth stands at $1 million, get at least $1 million in liability insurance.

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Expert Advice on Shopping for Liability Insurance

sarah Sarah Haun Expert

We turned to Sarah Haun, a property and casualty specialist at Advanced Insurance Designs in Barberton, Ohio, for expert advice on shopping for liability coverage.

How can someone determine how much liability insurance they need?

Consider how much you can afford (and are willing to spend) out of pocket to cover expenses that occur from a loss. For example, would you be willing to take out a second mortgage to help pay for a loss or claim that exceeds your home or auto policy limits? Do you have a large savings account and/or stocks and other assets you could cash in to cover your expenses if you are sued? Some people prefer to take their chances, and that’s fine. Ultimately, it’s helpful to look at the issue in a realistic way. Know what can happen and what you’d do if the need for liability insurance ever arose and you didn’t have any coverage.

Is it a good idea to get umbrella coverage?

For many people, yes. We live in a society where lawsuits are common, and umbrella policies are not very expensive. It’s even more important if you’re a homeowner, business owner and/or have a large number of assets. For example, if you (or a driver on your policy) are involved in an auto accident and seriously/fatally injure someone, there is a good chance that the “Per Person Bodily Injury” limit may not be enough to cover the expenses. If there is no umbrella policy to help cover the difference, you could lose your home, your business and any assets you have to cover the costs.