General Liability Insurance is a type of insurance coverage that protects a business or organization against claims arising from bodily injury, property damage, or personal/advertising injury.
While the types of claims General Liability protects against – slip and fall incidents, slander and libel, and property damage, for example – are common place enough for most business owners to have some level of awareness about them, most business owners and organization directors do not realize that General Liability also provides coverage for legal expenses and services for lawsuits arising from these types of claims.
What Is General Liability Insurance Coverage?
A General Liability policy is usually obtained as part of a Business Owners Policy (along with Property insurance), but it can also be purchased as a stand-alone policy. Some General Liability policies also include Professional Liability in a limited manner, but this is not necessarily true of all General Liability policies. For more information about Professional Liability insurance, click here.
A key point about General Liability is that it covers not only the business or organization, but also the owners, directors, volunteers, employees, and officers as well. In other words, if the business or organization that holds the policy is sued, the General Liability policy of course will offer coverage to that organization. In addition to that, however, the policy may provide coverage for other organizations affiliated with the organization who may also be served with a lawsuit.
This is important because it is not abnormal for a claim to be brought not only against the company that is allegedly responsible for injury or damage, but also against the individual who was involved (an employee for example) in the same incident.
Do I Really Need General Liability Insurance?
In many cases, a General Liability policy is required due to terms of a contract with a third party. Vendors, landlords, and financial institutions can all commonly require General Liability before an agreement can be entered into.
Contractual requirements aside, though, did you know that purchasing General Liability is the most important step you can take to protect the financial assets of you and your business? Even those business owners who have incorporated their business to protect their personal assets put their own financial security at risk by not carrying General Liability insurance.
With the risk of an incident occurring at any point in your business that could lead to a lawsuit, you may see quickly that you can’t afford not to carry General Liability.
Let’s review the coverage areas provided by General Liability and consider the potential scenarios that could happen with each:
Bodily Injury: Your products and operations can result in significant injuries to clients and the public. Slip & fall accidents are common. A simple oversight on the placement of a “Wet Floor” sign could lead to someone slipping and injuring themselves in the fall, and ultimately to a lawsuit. “Bodily Injury” certainly applies to the extreme accidents that can and do occur, but a lawsuit can be filed for the more common “minor” injuries as well. These happen often enough to warrant protection; and the more serious (and hopefully less common) injuries can wipe out financial assets in a single incident and resulting medical expenses and compensatory damages.
Property Damage: This type of coverage can protect against damage to a third party’s property, such as the personal property of a customer that is damaged at your office; to damage to the building you work in and lease.
Personal/Advertising Injury: This area of coverage provides protection for certain claims involving slander, libel, invasion of privacy, disparaging remarks about a competitor or their products and services in your advertising materials, wrongful eviction, false imprisonment, and more.
While you may think some of these things are uncommon and not a risk you would face, consider this: slanderous statements can be made when dealing with difficult clients. In addition, advertising injury can easily occur due to an incorrect description of a competitor’s products and services.
How Much Protection Does General Liability Offer?
As described above, General Liability offers coverage for claims involving bodily injury, property damage, and personal or advertising injury. These claims fall under one of four coverage types included in your General Liability policy, and each type has a limit of what can be paid per incident:
1. Damage to Premises Leased To You
This part of your coverage pays for claims arising from damage to the facility you are leasing or renting due to your negligence. Typically this coverage includes long term leases (such as your business space) as well as short term rentals (such as a one-day event space rental).
Typical Coverage Limit for Each Claim of this Type: $300,000
2. Personal or Advertising Injury
This part of your General Liability policy covers claims of personal or advertising injury as described above, including slander, libel, and a limited number of intellectual property violations.
Typical Coverage Limit for Each Claim of this Type: $1,000,000
3. Premises Medical Payments
Often, when a person suffers bodily injury at your place of business or because of the services or products you provided, medical expenses can be paid (and covered by your General Liability policy) to attempt to avoid a lawsuit.
Typical Coverage Limit for Each Claim of this Type: $10,000
4. Each Occurrence
This coverage limit in your policy applies to any claim filed that does not automatically fall into one of the other three categories. The each occurrence limit is the amount that can be paid resulting from any one injury event.
Typical Coverage Limit for Each Claim of this Type: $1,000,000
The four coverage limits described above determine how much can be covered per claim or per incident. This means that if someone files a claim and you are found to be negligent and have to pay $500,000 in damages, the type of claim would first be determined to identify what the maximum amount is that the insurance company would pay.
Once the type of claim is determined, the maximum amount paid per claim is evaluated. If this were a personal injury claim, for example, the maximum amount paid per claim is $1,000,000. Since $500,000 is well below the $1,000,000 per claim limit, the damages could be fully covered by the insurance company.
The next consideration, however, is the aggregate limit paid. There are two aggregate limits normally included in your General Liability policy:
- General Aggregate Limit
This section of your policy specifies the maximum amount the insurance company will pay for all claims filed combined during a policy period. However, the General Aggregate limit applies only to claims filed due to incidents that occur on your owned or rented premises, or due to your operations. The typical General Aggregate Limit is $2,000,000. - Products/Completed Operations Aggregate Limit
This limit differs from the General Aggregate limit in that it provides coverage for claims that arise from incidents that arise from the sale of your products or from your completed operations. This includes claims regarding products sold, services provided, and incidents that occur after a service has already been completed.The typical Products/Completed Operations Aggregate Limit is $2,000,000.
Aggregate limits indicate the maximum amount the insurance company will pay per policy period. Practically speaking, these limits are in place to protect the insurance company from paying the maximum per incident limit over and over again as claims continue to be filed, and helps prevent irresponsible behavior on the part of the insured.
How Much Does A General Liability Insurance Policy Cost?
The pricing for General Liability coverage varies, since rates depend highly on the exposure to risk your business faces.
The first consideration of course would be the risk level of your business and the services or products you offer. A water park, for example, would be considered higher risk due to the number of drowning incidents that can occur; while a retail store offering t-shirts would be considered a low risk business.
Next, the insurance company will consider your sales, square footage, payroll, and the number of “exposure units” your organization has. Exposure units are the number of people, amount of work performed, products, or assets that represent risk exposures.
Other factors that determine your premium for General Liability insurance are your previous claims (or lack of), the safety and responsibility record you have as an employer or organization, and the length of the policy period.
The best way to determine the cost of your General Liability insurance policy is to complete a Quick Quote request form – you will receive a free, no-obligation quote with customized terms for your industry niche.
