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General liability insurance is a type of insurance that protects businesses against accidents, injuries and other mishaps that could result in costly legal fees and damages. In general liability insurance, business owners get protection from third-party claims for bodily injury and property damage caused by the insured business. Fortunately, there are different types of general liability policies available. There are standard policies as well as extended policies with various policy riders. Understanding these various options can help you determine which one best meets your needs. Here’s what you should know about general liability insurance before buying a policy.
One of the most important factors to consider when purchasing general liability insurance is the amount of coverage you need. There are three types of coverage: minimum, standard and enhanced. Minimum coverage protects businesses from losses up to a certain dollar amount, while standard and enhanced policies offer greater protection at a higher price tag. It’s important to decide which level of coverage meets your needs before buying a policy because not all accidents result in monetary damages. For example, an accident that causes damage but no injuries would not require any type of insurance coverages.
What is a General Liability Insurance Policy?
If you own a business, you might be required to carry a general liability insurance policy to protect yourself and others if there is an injury on your premises. If an accident happens and you are liable for damages, a general liability policy will help you cover the costs. A general liability policy covers claims for bodily injury and property damage that occur on your premises or that involve your products. These claims could come from customers, employees or other third parties, like contractors. A general liability policy could help cover costs related to any of the following scenarios:
- A visitor trips and falls on your premises.
- A visitor is injured using a faulty product that you sold.
- A visitor’s property is damaged on your premises.
- An employee is injured on the job and files a workers’ compensation claim.
- An employee is injured outside the workplace and files a workers’ compensation claim.
- An employee is injured off the job and files a third-party claim.
Types of General Liability Insurance
Business owners often have trouble choosing the right general liability insurance policy. Fortunately, there are different types of policies available. Standard policies provide basic liability protection, while extended policies are more comprehensive (and more expensive). With extended policies, business owners may be able to add additional warranty protection with policy riders. There are three main types of general liability insurance policies:
- Standard Liability Coverage. Standard liability policies typically cover bodily injury and property damage claims up to $1 million, with $100,000 being the limit per claim. Standard policies are often the cheapest type of general liability insurance, but they also offer the least coverage.
- Extended Coverage with Additional Warranty Protection. With extended coverage policies, businesses can select additional warranty protection. With this policy, if a product is recalled, but you already sold it, the business is still responsible for the recall costs. This is especially important for retailers selling products that have a high risk of being recalled, such as children’s toys or food products.
- Other Add-Ons to Standard Coverage. Business owners may be able to add onto their standard coverage by purchasing extra policy riders that provide additional liability protection. For example, a business owner might want to increase their coverage for product liability claims.
Key Points to Remember When Buying General Liability Insurance
- The amount and type of general liability coverage you should purchase depends on the nature of your business.
- You should purchase the highest amount of coverage that you can afford. The more coverage you have, the less risk you will be exposed to in the event of a lawsuit.
- You should shop around for the best possible rate, but don’t forget to compare the coverage amounts offered by different companies.
- To find the best deal on general liability insurance, you may have to wait until the end of the year to purchase your policy.
- You may be able to save money by combining your business’s general liability coverage with other insurance policies.
Revised Coverage During the Policy Term
When a policyholder renews a policy and increases the coverage limit, the coverage amount is “locked in” for the duration of the policy term. That means, if a claim is filed against the policyholder during that time and the limits of coverage are exceeded, the policyholder will be responsible for paying for the entire claim out of pocket.
The only way to avoid being held financially responsible for the claim is to reduce the coverage amount on the policy. While this will reduce the risk of a claim adversely affecting your business, it will also reduce the level of coverage you have if a claim is filed.
Other Add-Ons to Standard Coverage
Business owners may be able to add onto their standard coverage by purchasing extra policy riders that provide additional liability protection. For example, a business owner might want to increase their coverage for product liability claims. Product liability insurance covers the cost of defending yourself against lawsuits related to faulty products.
Policy riders can also provide coverage for other types of risks, such as environmental damage. By adding these types of coverage to your general liability policy, you can protect yourself from a wide range of potential liabilities. Policy riders can be a valuable addition to your general liability policy. By selecting the right coverage, you can protect yourself from a wide range of potential liabilities.
For example, product liability insurance covers the cost of defending yourself against lawsuits related to faulty products. This type of coverage is important for businesses that produce or sell products, as it helps ensure that customers are satisfied with their purchase and do not file lawsuits later on. Policy riders also provide coverage for other risks, such as environmental damage. By adding these types of protections to your general liability policy, you can help safeguard your business from any unforeseen risks.
What Is Excess Liability Insurance?
Excess liability insurance is a type of additional coverage that policyholders can purchase to increase their standard policy’s coverage limits. With excess liability insurance, if a claim is filed against you and your standard coverage limit is exceeded, the insurance company will cover the rest. Excess liability insurance policies typically cover bodily injury claims, but they differ depending on the company offering the policy.
Some policies cover all types of claims, while others cover only certain types of claims. The best way to determine how much coverage you need is to determine how much coverage your standard policies offer. The next step is to evaluate the potential risks associated with your business and decide which additional coverage types are necessary. Once you know what types of coverage you need, you can compare policies from different insurance companies to find the one that best meets your needs.
How Much Does General Liability Insurance Cost?
The cost of general liability insurance varies from company to company and from policy to policy. The type of coverage you choose and the amount of coverage you get will also affect the price of your policy. Most business owners purchase a one-year policy, but many businesses find it more cost-effective to purchase a multi-year policy. The general rule is that the more years the policy covers, the lower the cost.
Choosing the right general liability insurance policy is critical for protecting your business. Purchasing the right amount of coverage will help to protect your business in the event of a lawsuit. It’s important to shop around for the best possible rate, but don’t forget to compare the coverage amounts offered by different companies. Choosing a policy with extended coverage and additional warranty protection may be more expensive, but it will provide more protection in the event of a lawsuit.