General Liability Insurance Coverage Explained

A company, that purchases Commercial General Liability Insurance (CGL), is covered for the cost of defending and settling real or fraudulent claims pertaining to bodily injury, that may be faced by a customer at the place of business or injuries sustained by employees at the client’s workplace; property damages; personal injury as a result of defamation; operations liability, and advertising injury up to a maximum amount as stated in the contract. This insurance is the most basic business insurance. As a rule, the deductible, or the percentage of the insurance claim that has to be borne by the insured, and the premium that is paid for the coverage provided by the insurance company, are inversely related. Companies also purchase umbrella liability to cover payments exceeding the general liability insurance policy limits.

General Liability and Property Insurance for Businesses

CGL is bundled with Property insurance and sold as a package that is referred to as the Business Owner’s Policy (BOP). Property insurance protects the assets of the business against accidents that may occur on or off the business premises. The main disadvantage of purchasing a BOP is that the coverage limits for CGL and property are low. This is because the insurance company aims at providing comprehensive coverage at a reasonable cost. Hence, it’s best if firms purchase CGL coverage as a separate package. Although, for a small business, it can be purchased as a part of a broader package.

CGL provides coverage for the following: the cost of medical care claimed by the injured party; restitution for death and loss of services; compensation for physical damage to other people’s property and loss of use of the same; compensation to consumers for loss on account of using company manufactured products, and retribution for loss due to services rendered by the company. Contractual liability coverage for any liability is assumed by entering into contracts like lease agreements for the building, elevator maintenance agreements or indemnity agreements. It also provides protection to business firms in case they are held liable for liquor-related accidents as long as the company is not engaged in liquor manufacturing or distributing business. Coverage for hired and non-owned auto, the cost of legal defense; coverage for advertising injuries as a result of publishing inaccurate information; protection for violation of someone’s right to privacy, and infringing on another company’s copyright, title, or slogan is also provided by this coverage.

These schemes, however, do not protect the business from professional errors or negligence that is covered under professional liability insurance or Errors & Omissions (E&O) liability insurance policy. Professionals as well as companies providing services to clients in lieu of a fee should purchase this policy, since it protects the insured parties from legal hassles such as claims arising from negligence or omissions relating to the discharge of professional duties or the rendering of services. The coverage for this policy starts at $1 million. The insurance deductible, that is defined as the money required to be paid by the insured, per claim, works out to $1,000 to $25,000. The deductible is determined on the basis of the premium that is paid in exchange for the coverage provided by the insurance policy. As mentioned earlier, a lower deductible would mean a higher premium, since the insurance company is required to pay a greater portion of the claim.

Every company should try to protect itself from legal hassles that may arise in the course of operations by availing insurance that is appropriate for the business. This is especially true if a business is operating in a state that has a history of awarding huge compensation for damages to consumers and employees, for which the company is held liable.




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