When running a business, accidents happen and then someone – usually the business entity itself – needs to take responsibility. General liability insurance, also known as business or commercial liability insurance, covers businesses for general claims related to bodily injury to a third party and property damage. Out of all the insurance products for business owners, general liability insurance is among the most important.
Continue reading to learn the nuances of general liability insurance, when a business is going to need it, and tips for saving money on the insurance policy.
In short, general liability insurance covers businesses for expenses related to bodily injuries, personal injuries, and property damage. The damage must have been caused by business operations, products, or occurred on the business premises. If you receive a liability claim, you will need to cover the costs.
There are two primary types of general liability insurance: claims-made policy and occurrence policy. Which one you should get depends on your business needs.
Under the claims-made policy, you are covered when the claim is made while the insurance policy is active. Losses must have occurred after the policy’s retroactive date. The retroactive date determines how old a loss can be for the claim to be covered.
You will be uninsured once the policy expires or is cancelled. These policies usually have lower premiums, but might pose problems once cancelled or switched to a different policy.
With the occurrence policy, you are covered for the insurance period even after the policy has expired. In other words, you can file a claim for losses that happened while your policy was active regardless of whether you have insurance at the time of filing the claim.
These are simpler to own, especially since you can still file claims for previous losses when you switch to a different insurer. A new aggregate limit is given with each renewal.
General liability insurance can be combined with commercial property insurance in the business owners policy.
Such policies typically include the following coverages:
Although general liability insurance is considered comprehensive, there are a few things it does not cover. These include:
Many entrepreneurs benefit from the financial protection it offers. While general liability insurance is not required by law, it is necessary de facto as liability claims have become increasingly more common, especially when working with clients directly. A one-off unsatisfactory incident with a customer or a neighboring business could become the ruin of a business. However, with proper insurance, the risk of bankruptcy can be significantly reduced.
Additionally, for some professions, general liability insurance might be more cost-effective than a business owners policy, e.g., when there are no premises to insure.
Here is a non-exhaustive list of professionals that benefit from general liability insurance:
Finally, some insurance companies provide general liability insurance under business owners insurance without any additional property-related coverages.
Insurance saves you money in the long run, but that does not mean you cannot or should not save money on the coverage itself. You should always try to get the best possible deal on the market. When hunting for a policy, consider these things:
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