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What Is Commercial Liability Insurance?

It’s always important to protect your business. Whether that is physically in the form of security, from reputational damage, or something else, you need to mitigate against financial risks. One of the best ways to protect your company is through commercial liability insurance.

Whether you run a small shop or a multinational corporation, unforeseen events that result in financial loss are always a threat. This is where commercial liability can be important. Here we’ll delve into what it is, how it can help your business, and whether or not it’s right for you.

What Is Commercial Liability Insurance?

Also called business liability insurance, it’s designed to protect businesses from financial losses arising from third-party claims. These claims can be for several reasons, including bodily injury and property damage.

If these claims are due to serious incidents, they could potentially financially ruin some companies. This is why commercial liability insurance is required, as it can shield businesses from the consequences of legal fees, lawsuits, and settlements.

Types of Commercial Liability Insurance

There are a few different types of liability insurance that a company may need. Here, we’ll go through the most important ones so you can see which may apply to your business.

General Liability Insurance

General liability insurance is the most important type of coverage that you can get. This will protect businesses against claims for bodily injury and damage to property. These are the most frequent and financially severe claims that a company may face.

Examples of how this can help are property damage caused by the business’s operations, products, or services. It can also protect against any injury claims. These can come from multiple sources, such as staff, delivery people, and clients.

Professional Liability Insurance

Also known as errors and omissions (E&O) insurance, this will protect a business against any mistakes that may have serious consequences further down the road. For example, an accountancy firm that gives bad advice to a client, leading them to receive financial penalties.

However, it’s not just bad advice that E&O insurance will protect against. It also provides protection from business delays, loss of personal data, omissions, negligence, or slander. If you have a business that can have a significant impact on the lives of others, this insurance can be vital.

Product Liability Insurance

If you make products, then you may need product liability insurance. This will safeguard you against claims related to defective products. You won’t be liable if an injury was caused by incorrect use of the product, but if an injury is caused by a fault that should have been identified, this insurance can save you from large financial claims.

Cyber Liability Insurance

In this modern world, it has become increasingly important for any business to have cybersecurity insurance. Even those companies that aren’t internet-based may benefit from this insurance, as the risk of hacking is always there for any business that uses computers.

Data breaches, hacking, and other cyber-related incidents can all have huge financial consequences. Not only can this insurance cover you for the fees and remediation costs that may occur, but you can also get cover for the reputation management you may need.

Directors and Officers Insurance

Another important form of commercial liability insurance is directors and officers insurance. Ultimately, the leaders in any company are going to be responsible for any decisions that are made. This means they are also liable for the consequences of those decisions.

Due to this, directors and officers can face legal action from a wide range of sources, such as employees, customers, and shareholders. This insurance will cover them against such costs as court/legal fees, settlements, and loss of income.

directors and officers insurance

Importance of Commercial Liability Insurance

We’ve looked at the main types of commercial liability insurance, but why is it so important? Here are the main reasons why it can be vital to your business. 


Commercial liability insurance is not a legal requirement in Canada. While you don’t need to have it by law, some of your commercial partners may require you to get it. For example, a landlord may demand you to have adequate insurance before they rent you a commercial property.

There are many other partners that may require you to have insurance, too, such as clients and suppliers. Failure to comply with these requirements may lead to breaches of contract and reputational damage.

Financial Protection

Whether it’s personal or commercial, the most important reason to get any type of insurance is the financial protection it provides. Without liability insurance, a business will be exposed to significant financial risks that can have disastrous implications.

There are many different ways you can get a claim against you, and the most significant costs are those of legal defense, settlements, and judgements. Having the right insurance in place will give you a crucial safety net.

Business Continuity

If you’re faced with a major lawsuit or financial loss, this may lead to the closure of the business, either permanently or temporarily. Commercial liability insurance ensures you can keep the business running, regardless of the challenges you face.

Enhanced Credibility

Businesses with liability insurance will appear more reliable and trustworthy. Clients, partners, and investors are more likely to trust your company, as having insurance demonstrates a commitment to responsible business practices.

enhanced credibility

Final Thoughts

Commercial liability insurance is vital for any company. It will act as a safety net and protect you from the unpredictable nature of legal and financial risks. It’s important to look at the different types of coverage to ensure you get the protection you need.

For those businesses that want long-term success, investing in the right insurance policies will not only protect your business but also make it more reputable. If you’re interested in commercial liability insurance, make sure to give Ron Johnston Insurance a call, and we’ll be delighted to help.

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