The Basics of General Liability Insurance: Protecting Your Business from Risk
Operating a business comes with many risks, and one of the best ways to protect yourself is by investing in general liability insurance. This type of insurance provides financial protection if you are found legally responsible for an injury or property damage that occurs as a result of your business activities. It is an important form of protection for any business, and understanding the basics of this coverage can help you to make an informed decision about your insurance needs. In this article, we will explore the fundamentals of general liability insurance, how it works, and why it is a smart investment for any business owner.
What is general liability insurance? General liability insurance protects you from financial damages if you are held responsible for an injury or property damage that occurred during the course of your business. You might be surprised by how often business owners don’t have general liability coverage. It is a type of commercial insurance that is essential for any business that deals with the public. General liability insurance covers claims that arise from bodily injury, property damage, or advertising injury. It also covers defense costs if you are sued. General liability policies typically have a combined single limit of $1 million per occurrence, $1 million per year, and $2 million in aggregate. The first step to understanding general liability insurance is to know what it covers and what it doesn’t. General liability insurance covers injury or damage caused by your business activities, but it does not cover your employees. It also does not cover property loss, or any claim arising out of your ownership of real estate. General liability covers claims brought by third parties who were injured by your products, services, or business operations. This insurance can be customized to meet the needs of your business. There are five basic types of general liability policies: Coverage a - bodily injury: This is the most common form of general liability coverage. It covers claims arising from bodily injury, including medical bills and lost wages. Coverage B - property damage: This type of coverage protects your business from claims arising from property damage, such as fire, water damage, and vandalism. Coverage C - personal and advertising injury: Personal and advertising injury coverage protects you from claims for slander and libel. Coverage D - contractual liability: This coverage protects you from contractual liability, or claims arising from your contractual obligations. Coverage E - legal defense: Legal defense coverage provides financial assistance with defending yourself against third-party claims.
How does general liability insurance work? General liability insurance coverage applies if you are sued for bodily injury or property damage. It also covers the cost of your defense if you are found to be at fault. A business owner’s policy (BOP) combines the two types of coverage--bodily injury and property damage. Once a third party files a claim against you, your insurance company assigns a claims adjuster to your case. The adjuster will collect information, interview witnesses, and review any available evidence. The adjuster’s job is to figure out if the claim is covered and how much it will cost to settle the claim. Once the adjuster has enough information, the insurance company will make a decision on whether to settle or defend the claim. If the claim is valid and the company decides to defend the claim, the company will hire an attorney to represent you in court.