Classifications Of General Liability Insurance
You’ll find two kinds of general liability insurance for your business-standard and broad form. The following sections discuss what these are.
Standard General Liability Insurance
The standard general liability insurance is the earliest variety of commercial general liability policy. It only covers personal injury claims and property damage claims.
The coverage it provides can't be customized or be introduced with endorsements. Nowadays, insurance companies sell this to customers looking for the cheapest coverage for their business.
Broad form general liability insurance is a comprehensive version of commercial general liability policy. This doesn’t only protect your business against claims for bodily injury or property damage but also other business exposures such as reputational harm and advertising injuries, liability to rented premises, and liability over products and completed operations.
Advertising Injury Coverage
Broad-form general liability insurance provides advertising injury coverage, which covers costs if your business committed or allegedly committed slander, libel, copyright infringement, and invasion of privacy.
Rented Premises Liability Coverage
Your business will rent a space if not now, then in the future. There’s the possibility of your rented space getting damaged because of a fire due to employee error or an accident.
Because of this, broad form general liability insurance comes with rented premises liability coverage. Rented premises liability coverage will indemnify the owner if a space rented to you is damaged by fire.
Non-Owned/Hired Auto Liability Insurance
Some insurance companies offer a broad form general liability insurance with non-owned/hired auto liability coverage. Non-owned/hired auto liability insurance will take care of costs if your business hired or borrowed a vehicle and such vehicle caused an accident resulting in the injuries or property damage of third parties.
How Does General Liability Insurance Work?
General liability insurance works the same way regardless of which insurance company underwrites it. Here’s a quick summary of the functions of general liability insurance:
Cover the medical treatment of a claimant who holds your business liable for his or her bodily injuries
Refund the losses of the claimant who holds your business liable for his or her damaged property
Pay for attorney fees, investigation fees, court fees, and other legal defense costs if your business faces a lawsuit for bodily injury or property damage
Cover settlements and defense costs if your business is liable for slander, libel, and copyright infringement (only if advertising injury coverage is added to its terms)
Refund the losses of the landlord if his property got damaged by a fire due to your business’s negligence (this applies if your general liability insurance has rented premises liability coverage)
Cover the treatment and refund the loss of victims if the vehicle your business hired or borrowed caused an accident (general liability insurance will only have this function if non-owned/hired auto liability coverage is added to its terms)
How is General Liability Insurance Underwritten?
Carriers underwrite general liability insurance as a claims-made policy. In simple terms, general liability insurance can only provide coverage if you request to use it after a covered peril happens. Even if a claim happened during its policy period, general liability insurance can’t help you if it has already expired.
General Liability Insurance Policy Limits
The general liability insurance of most commercial insurers has a $1 million-$2 million per occurrence and a $2 million aggregate.
But still, there are insurance companies underwriting a general liability policy with a $300,000-$500,000 per occurrence limit for small startups and home based businesses.
On another note, large businesses can avail a general liability insurance with a $3 million-$5 million per occurrence limit and a $4 million-$5 million aggregate.
Policies You Can Add To General Liability Insurance
Nowadays, insurance companies allow you to add the language of other insurance policies to general liability insurance. This section defines each and explains their functions:
Product Liability Insurance
If your business is in the retail industry or food industry, carriers will allow you to add the terms of product liability insurance to general liability insurance.
Customers can sue a business and demand compensation if a product they bought or tested caused injuries or property damage. Product liability insurance covers this peril.
Product liability insurance covers the cost of legal defense, product recalls, and settlements if your business is liable for the injuries or property damage of a customer by selling a product which has:
Design defects
Manufacturing errors
Labeling errors
If your business is in the food industry, product liability insurance can help if a customer files a claim after experiencing allergies or food poisoning. Coverage also applies in case the aggrieved person sustained a food-borne illness.
Liquor Liability Insurance
You can add liquor liability insurance to general liability insurance if your business is involved with the sales, distribution, or manufacture of alcoholic beverages.
Liquor liability insurance covers defense costs or settlements when a customer files a claim after getting drunk and wants your business to take responsibility because:
It over-served alcohol
Its employee failed to evaluate the claimant’s level of intoxication
The claimant is a minor and even if this is the case, your business proceeded to serve an alcoholic drink
Additional Insureds In General Liability Insurance
Insurance companies allow you to name additional insureds in your general liability insurance policy.
So what is an additional insured anyway? Additional insureds are entities, though not paying for premiums or owning the policy, can still be covered by your general liability insurance in case a claim is filed against them.
The naming of additional insureds is one of the most essential characteristics of a comprehensive general liability policy. It allows you to provide protection to landlords, clients, and other entities who you do business with.
Which Businesses Need General Liability Insurance?
All businesses need general liability insurance. However, some types need the policy at a higher degree than others. The following will find general liability insurance coverage highly useful:
Professional Liability Insurance vs General Liability Insurance
General liability insurance is often confused with professional liability insurance. So it’s important you know how the two differ.
To reiterate, general liability insurance covers costs if your business injured third parties or damaged their property. It also helps when your business damages a rented space, or harms someone’s reputation.
Professional liability insurance, on the other hand, covers claims filed because there’s an issue with regards to how you accomplished a task on behalf of a client, which resulted in economic or financial losses.
Contractor Liability Insurance
General liability insurance for construction companies, also called contractor liability insurance, is underwritten for the liability exposures common in construction projects such as:
Equipment going haywire which results in injuries and property damage to the people near the vicinity of the construction project
An employee hurts someone while operating equipment due to negligence
Explosions and other major accidents happen on the construction site that inflicts injuries or property damage to others
In connection, these are the common claims covered by the general liability insurance for contractors:
Accident claims-Payment for medical and funeral fees for third-party injuries and fatality during construction. Take note that this is not applicable to employees; that will be worker's compensation policy
Copyright infringement-Your construction design or advertisements are the same as competitors. This can be room for a lawsuit. The policy can pay for the fees that may arise if sued
Property damage claims-if damage to your customer's property happens during construction, the policy will pay for the repair or replacement
Product claims-If the equipment used or established by the company causes damage, the policy can be a source of indemnification for the losses of affected parties
General liability insurance for contractors is a requirement before a project is undertaken. The amount of coverage varies as it depends on which state a contractor is operating. Note that there are states that don’t have any general liability insurance requirements in place.
Construction is a high-risk activity. And so, the cost of general liability for contractors is expensive. Most insurance companies require a hefty down payment and additional fees charged on a monthly or annual basis for a 6-month or 1-year of coverage.
General Liability Insurance for LLC
Getting general liability insurance for LLC (limited liability company) is essential for small business owners. Usually, An LLC structure provides some personal protection for you, and claims made against your business still affect your income source.
Not having the total protection you need can be devastating for the business. This is where general liability insurance is needed, as it will help you manage the claims made by third parties and operate your business well. Without putting a GL policy in place, you will be the one to negotiate claims, hire attorneys, and deal with the costs.
Whenever deciding, you may always think about the money you need to spend. Most of the time, you will get the cheapest general liability insurance small business available.
But again, think about the several factors that might affect your business. All of the factors need assessment that you will decide and with the aid of your insurance agent or a broker. Through their expert advice, they can match what type of policies best fits your small business.
Small Business General Liability Insurance
Small business owners are at equal risks, like other businesses. It is not true that investing in insurance must only be a priority when a company is large. Any existing business must take some time to develop a risk management plan that can protect them any time a threat to their financial stability comes their way. Buying a small business general liability insurance is actually an investment and not considered a luxury.
General liability plans are not created equal, and knowing what works for your business will give you the right coverage needed and save you from spending more than you should be. So, what exactly is a small business liability insurance?
In its simplest form, this type of insurance offers coverage for the cost that might incur if a customer is hurt or injured at your establishment. But small business liability insurance covers more than that. It can cover costs for settlements out of court, personal distress and suffering, penal damages, and compensation in excess of actual damage. For rented spaces, this business liability insurance can offer protection for damages due to fire or explosion.
While these are the risks covered by small liability insurance, there are circumstances not covered by costs when employees or you encounter an accident in the establishment. Cease of business operation due to natural disasters or employee injuries, employee contention, cyber-attacks, and errors and omissions are other cases not covered by this insurance. These situations are covered by other insurance types that you may buy separately or acquire as an add-on to your business owner’s policy.
Small business general liability insurance cost is dictated by many factors and the available budget the business has. The risks that you might encounter will be one of the significant factors you need to think about. If your business is high-risk for accidents or injuries, it is a must to get more coverage, and if your business is low-risk, it is better for you if you get reasonably-priced general liability insurance for small business.
Food Liability Insurance
Food liability insurance is a general liability policy underwritten for food businesses. Consider getting this if you own a:
Food liability insurance will cover settlements and defense costs if a customer files a claim against your business for improper food preparation or food poisoning.
This will also cover costs if your food business over-served alcoholic beverages to a customer who then became drunk and sustained property damage or bodily injuries.
Note that food liability insurance also covers your liability for rented premises. This is very useful if you’re a food vendor selling at flea markets, festivals, stadiums, and farmers' markets.
