| How General Liability Insurance Works |
| Written by Aaron Adam | |
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It's an unfortunate circumstance of modern society that even minor mishaps can result in big lawsuit settlements that can bleed a business to death. That's why just about every business needs a solid general liability insurance policy. General liability insurance protects insureds from claims that may arise from injury caused to a third party by the action or inaction of the insured (owner of the policy) during the course of the insured's business. These claims usually involve negligence or acts of omission by the insured. Owning and operating a business comes with a great deal of responsibility. Even if you operate your business ethically and with the utmost care given to clients and potential clients, situations can arise where claims can be made against you. General liability insurance can help protect both your business and your personal assets from claims of this nature. General liability insurance is usually sold as part of a business-owner's policy, which bundles liability and property insurance, but under the bundled plan the policy limits for liability coverage are usually rather low. Many businesses that need higher limits to their liability coverage purchase general liability coverage separately from their property coverage. Because of an increasing number of lawsuits that potentially pose a threat to local economies, and to protect the public from uncovered injuries and losses, many states are requiring businesses to carry a certain amount of liability coverage, with amounts depending upon the type of business being conducted. CoveragesA general liability insurance policy provides coverage for:
Independent contractors liability: This covers actions or inactions of contractors that your business may subcontract a portion of a task to. DamagesA general liability policy will usually pay three types of damages, up to policy limits:
ExclusionsGeneral liability insurance usually excludes from coverage on-the-job injuries to employees, claims arising from the operation of automobiles owned by your business, pollution claims, acts of your company's directors and officers, products and losses attributed to acts of war, terrorism or natural disasters. Separate policies covering these types of circumstances are often sold by insurers.How much do you need?When determining how much liability coverage your business needs you should consider two factors: the potential for claims associated with your business and your state's record for jury awards. Business that have a high likelihood of being sued probably need more general liability coverage than those that run a lower risk of lawsuits. Also, if you live in a state that has a track record of juries awarding big damage amounts to plaintiffs, you may want to double down on your general liability coverage.Congress has tried to pass curbs on liability lawsuits before, but failed, and with the current Democratic majority it is unlikely that such an attempt will be made in the foreseeable future, as Democrats are perceived as tending to favor plaintiff rights above those of businesses. With the potential for catastrophic loss combined with the proliferation of lawsuits, it is increasingly apparent that obtaining general liability insurance coverage isn't an option, but rather a matter of survival for many businesses. |
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