Understanding Commercial Liability Insurance

Accidents happen in our everyday lives. Regardless of the enormity of the situation, it cannot be avoided that there are many opportunist waiting for a chance to make money in the most quickest of ways. This is why general liability insurance is a necessity for any business to have together with worker’s compensation insurance property insurance.  If by some chance the company gets sued for injury or damage to property because it has direct or indirect cause to that circumstance, the business’ assets are protected by the insurance.

There are two ways to consider acquiring general liability insurance.  You may opt to purchase it on its own or you can acquire it as part of BOP or business-owner’s policy. The disadvantage of purchasing it with business-owner’s policy is that the liability coverage usually low.  If your business needs a higher coverage than the average company, it is better suited for you to purchase general liability insurance separately.  There are a couple of factors that affect the level of coverage of a business:

• The type of business you are in is a substantial factor to consider because of the risks involved in your business.  For example, a company or business that relies a lot or uses heavy equipments and machineries on a day to day basis has a higher risk of accidents and such happening.  They are more likely to be sued than a business that deals with a more subtle type of business in the personal services sector, ie, beauty parlor chain.

• Considerations to the location of your business are of high significance to the level of coverage of liability insurance it can acquire.  Some states have a high history of damage claims being awarded to plaintiffs therefore liability insurance coverage requires to be higher than in other areas.  Consult with your insurance agent about this topic.

• The state in which you operate. Businesses that operate in states with a history of awarding high damage amounts to plaintiffs typically need to carry liability insurance with higher coverage limits. An insurance broker can offer guidance in this area.

Under the coverage of general liability insurance are claims of:

• Bodily injury
• Personal injury
• Property damage
• Claims of damage from false advertising or slander (advertising injury)
• Compensatory damages
• General damages

General liability insurance however does not cover punitive damages because they are considered as punishment for acts that were intentionally done.  How general liability insurance works is that the insurance company is obligated to pay for the legal expenses that a business may incur in case of a law suit or liability claims.

Policies of general liability insurance always state the maximum pay-out that the insurance company will pay during the contract period.  It is also most often times stated in the policy the maximum pay-out per occurrence.  Be sure to be aware of the fine prints of your general liability insurance.  If your insurer cap the maximum pay-out to $1 million and you lost in a lawsuit with liability claims of $1.5 million, the business will have to pay for the remaining $500,000 excess.

You may look into umbrella liability insurance in cases like this.  An umbrella liability insurance will cover the excess amount not covered by the typical liability insurance policy.  This is another protection that you provide for your business.

It is always advisable to take all necessary precautions to avoid accidents.  This will help in keeping your insurance rates and liability risks down. 

• Make sure that you have a high standard in terms of product quality control and it is strictly being implemented.

• Train all personnel or employees properly to avoid miscommunications and mishaps.

• Research safety precautions, insurance companies usually have safety tips for the kind of business you are in.  Make sure they are always being followed.

• All company records must be intact, complete and up-to-date.

In any case of an accident regardless of the extent but you feel may lead to a liability claim, report it to your insurer immediately.  You must document everything as soon as it happens.  If a claim is filed, always furnish copies of summons, legal notices and such to make the process run smoothly as possible.