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What are the different types of liability insurance?

July 16, 2025 | Professional Liability

This article was originally published August 12, 2022

In simple terms, legal liability means being "responsible or answerable in law; legally obligated." Businesses can be found liable for a wide variety of actions that affect others, and if they are, they may be required by a court to pay monetary damages to an individual or organization.

Every business faces various risks that can expose it to liability. Fortunately, there are different types of liability insurance to address those risks and provide financial protection. Read on to learn more about liability insurance.

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Understanding liability insurance types

There are several liability insurance types. Some have “liability” in the name, and others don’t. But all can be crucial when it comes to protecting your business from the high cost of lawsuits. 

biBerk offers many different types of liability insurance:

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    General liability insurance. This type of liability insurance coverage provides protection against many kinds of liability. This includes things like damage done to customer property by your employees, visitor injuries at your business location, harm caused by products you develop or sell, and what are called personal and advertising “injuries,” meaning damage you do to another business by actions like stealing their advertising ideas.
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    Professional liability insurance. If your business provides professional advice or services to clients, they can sue you if they think your business has caused them a financial loss. For example, if you’re an accountant and you make a mistake on a client’s tax return that costs them money, you might be found liable for financial damages. Professional liability coverage, which is also called errors & omissions or E&O insurance, provides protection in the event of actual or alleged unfulfilled duties, negligence, and errors.  
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    Commercial auto insurance. Businesses that own or lease vehicles should have—and typically are required to have—commercial auto coverage. It protects the business from liability that can occur if an employee or other authorized driver of a company vehicle is responsible for an auto accident that causes injuries or property damage.
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    Business owners policy (BOP). Also called property & liability insurance, this type of policy conveniently combines coverage for company property with general liability protection in one policy. It can also cover damage to the property of others that’s in your care, custody and control even if you aren’t liable for the damage.
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    Cyber insurance. You can add this insurance to a BOP, general liability, or professional liability policy. It helps cover costs related to system hacks or data security breaches where someone steals sensitive information like client credit card data and uses it to commit fraud or is likely to.

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Umbrella insurance: an added layer of liability protection

Also referred to as commercial umbrella insurance, to distinguish it from personal umbrella insurance, this type of business liability insurance never exists on its own. It provides an added layer of financial protection on top of another biBerk liability policy.

Why is the extra protection needed? Every type of liability insurance—like most other business insurance policies—has a maximum limit that it will pay in the event of a covered incident. However, in some instances, the damages awarded in a liability lawsuit could exceed a policy’s limit. That’s when umbrella insurance is crucial.

For example, let’s say you have a $500,000 limit on a professional liability policy but you also have an umbrella policy to go with it. If you’re found liable for $650,000 in damages, the umbrella policy can cover the $150,000 difference between your professional liability policy limit and the damages awarded.

Liability insurance can cover legal defense costs.

An unfortunate fact about lawsuits is that if one is filed against your business, you have to defend your company. That’s true whether you’ve done something wrong or not. 

Most types of liability insurance can cover defense costs. That way, you aren’t required to pay out-of-pocket to protect your business from claims—whether valid or baseless—by your clients, customers, or others.

Learn what you’ll pay for various liability insurance types.

Many business owners are surprised when they learn how affordable the different types of liability insurance are. When you consider that the cost of even a simple liability lawsuit can easily be tens of thousands of dollars or more, these policies provide very cost-effective protection—not to mention, powerful peace of mind.

You can find out what you’ll pay for different liability insurance types by getting instant online quotes from biBerk. All you have to do is provide a little information about your business, and we generate a quote for your insurance cost.

If you decide to buy a policy or policies, you can do that online, as well. Plus, you can manage your policies and report claims on our website for maximum convenience.

Liability insurance frequently asked questions (FAQs)

What is liability insurance and why do I need it?

Liability insurance protects your business from financial losses if you’re held legally responsible for injury, property damage, or negligence. It helps cover legal fees, settlements, and medical costs.

What is the difference between general liability and professional liability insurance?

General liability covers physical risks like bodily injury or property damage. Professional liability covers financial losses due to mistakes, negligence, or omissions in professional services.

Do I need more than one type of liability insurance?

Many businesses need a combination—such as general liability and professional liability—depending on their operations and exposure to risk.

Is liability insurance required by law?

Some types of liability insurance are legally required, such as commercial auto. You should check with your state and local authorities for details.

Does a business owner’s policy (BOP) include liability insurance?

A biBerk BOP includes general liability insurance along with property insurance. You can also enhance this type of liability coverage with policy add-ons called endorsements.

Be sure to protect your business from all types of liabilities.

Even if you run your business carefully, liability lawsuits can happen. But if you’ve got the right liability insurance, those lawsuits don’t have to create a large financial burden for your company.

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