When you buy a business owners policy (a BOP) as the basis of your commercial insurance package, then you’ll probably receive general liability insurance as an included component. This is essential coverage for most businesses due to the assistance it provides in case you are responsible for third-party losses.
Though each general liability policy provides exceptional coverage under its standard limits, it’s important to remember that these limits do exist. Therefore, you’ll not only need your standard coverage, but you’ll also need to increase your liability protection in a ways that optimally protects you against your company’s liabilities.
Let’s take a closer look at the standard protection offered by general liability insurance, along with some of the ways that you can increase your coverage. With the right combination of protection, you’ll receive optimized security against multiple threats that your company faces.
Understanding Liability Insurance
Businesses face liabilities because they pose risks to others. These don’t have to be clear or present safety hazards. They might simply be mistakes, negligence or failures to take care of small problems that eventually develop into massive problems.
When you fail in some manner, your failures could not only harm the business, but also other people. Therefore, because the harm they sustained was your fault, the affected parties might expect you to compensate them for their losses. Some could even sue you. When this occurs in a business, then this obligation could force the business to face unplanned expenses and the potential for financial problems. General liability insurance helps to lessen that burden.
With a general liability insurance policy in place, you can turn to this coverage to pay for third-party losses for which you are legally responsible. This coverage can first compensate the affected party for their losses. Then, it can also pay the legal expenses of both involved parties should the claim originate because of a liability lawsuit.
Under a BOP, general liability insurance usually offers at least three types of standard coverage:
- Bodily Injury Coverage
- Property Damage Coverage
- Products/Completed Operations Coverage
Once you have this coverage, you can increase your protection by buying additional coverage.
Bodily Injury Liability Coverage
A bodily injury liability claim occurs when a third party sustains harm because of your business’s mistakes. One of the most common types of claims that occurs is a slip-and-fall injury. This is a situation where a third party, like a customer, slips, falls and gets hurt while visiting your business.
Because the accident occurred on your property, you might have to repay the customer. Your liability policy can compensate them for their medical bills, lost income and possibly other damages.
In addition to bodily injury liability coverage, many BOPs also offer accidental medical payments insurance. This coverage pays for injuries that occur on your business property regardless of who is at fault for the injury. A third party might get hurt on your property even if your negligence was not a factor in the injury. This coverage can assist them in those situations if they request assistance.
Property Damage Liability Coverage
Bodily injury liability coverage applies to physical harm caused to third parties. On the other hand, property damage liability insurance pays when you accidentally damage their property.
For instance, you might be a carpet cleaner who visits homes to perform your job. One day, while setting up your equipment, you accidentally cause a broken pipe which floods the client’s upstairs. The water damage was your fault. Therefore, property damage liability insurance might cover the client’s losses.
Products/Completed Operations Coverage
Some businesses make products to sell to customers. Others provide services. Should these items cause problems, then a claim under liability insurance might make up the difference.
A products liability claim might occur when something you make harms someone. Suppose, for example, that you manufacture coffee mugs. However, an undiscovered design flaw causes the items to break and spill. Should they spill hot coffee onto someone, burning them, then the client might sue you because you are the cup manufacturer. Since the design flaw was your fault, you might have to pay them.
A completed operations liability occurs when you perform a service for someone which causes harm to them after the fact. For example, a plumber might install a new drain on someone’s home. However, because they didn’t install the drain correctly, it leaks and eventually causes damage behind the walls of the home. The result of the plumber’s work caused the damage, and therefore might qualify the client to file a liability insurance claim.
Expanding Your General Liability Coverage
All general liability policies will have coverage limits and exclude certain types of claims. Therefore, you might need to both increase your liability coverage limits and buy further coverage for additional protection.
One way to do so is to buy umbrella liability insurance. This coverage adds additional protection on top of the general liability insurance limits provided by your BOP. So, though your BOP might only pay a maximum of $1 million for a liability claim, your umbrella coverage might pay once a claim surpasses those limits. You’ll have additional protection even once your CGL policy reaches it maximum.
And don’t forget, you can also buy other liability coverage to expand your BOP’s reach. Some of the supplementary protection you might needs includes errors & omissions, employment practices, cyber, employee dishonesty and additional liability benefits. Your agent can guide you through setting up the appropriate protection.