Small Business Liability Insurance Basics
General Liability Insurance, also known as Comprehensive General Liability insurance, covers third party claims that an insured becomes liable for due to the operations of his or her business. A third party claim would be from any entity other than an employee. Not every policy is the same and the exclusions and endorsements added to a policy may limit the coverage. The main areas of what general liability covers are:
- Bodily Injury & Property Damage
- Products and Completed Operations
- Personal and Advertising Injury
- Owner’s and Contractors Protective (OCP)
Bodily Injury and Property Damage liability arise out of accidents resulting from the operations or premises and completed operations. Liability insurance exists to protect a small business from potential lawsuits. Policies vary greatly, and they cover different classifications of risks for varying costs. Before shopping for a policy, it is important to know a little more about liability insurance.
Liability Insurance Comes in Many Forms
- Commercial general liability, which is also called CGL, is a very broad insurance product. It covers claims from accidents, injuries or negligence when the business is at fault. Small businesses may face a wide array of damage charges. Personal injuries, property damage, libel and slander are just a few examples.
- Product liability insurance covers legal fees for litigation involving a faulty product. It also covers any personal or property damage charges caused by the defective product.
- Professional liability coverage pays for damages caused by services and is also known as errors and omissions coverage. This is for companies that market a service instead of a product. For example, professionals in medical clinics must have medical malpractice coverage.
- Cyber liability coverage can cover the losses incurred by your business in the event of a data breach or other cybercrimes.
Business Type Has an Impact on Premium Amounts
Insurers classify businesses into several different categories based on risk, which plays a key part in determining annual premiums. Every business has a certain degree of risk, and some types face many more risks than others. For example, a roofing company would be a riskier business than an accounting firm. Premium amounts are determined in part by insurance underwriters research on the number of claims made by similar businesses, the size of a business’ payroll, the amount of sales made, and the location of the business also contribute to premium amounts.
Liability Insurance Does Not Cover Everything
General liability coverage does not offer benefits for employees’ work-related injuries and illnesses. Workers’ compensation coverage usually provides benefits for such expenses. Liability coverage does not cover intentional acts or damages sustained from those acts. Employee fights, criminal activity and fraudulent behavior are some examples of intentional acts.
You May Be Required to Have Liability Insurance
Several states require some professions to carry liability coverage. If a business uses a vehicle or lets employees drive it, commercial auto coverage is also important. Although most states have a specific standard for minimum auto liability coverage, the amounts vary from state to state. It is important to discuss these numbers with an agent. In the event of a claim, liability insurance provides coverage for defense costs, litigation claims and other legal fees.
Save Money on Your Liability Insurance
If business owners document certain safety measures taken to reduce or eliminate risks, insurance companies may classify the company as low risk. Smoke alarms, fire alarms, sprinkler systems and multiple fire extinguishers help lower risks. It is also beneficial to train employees in various safety practices. Be sure to make equipment readily available. When vehicles are used for business purposes, make sure they are maintained properly.
Let us help you make an informed decision about your business insurance needs. Our licensed agents specialize in helping small businesses obtain the best coverage at the best price, give us a call today at 888-834-8619.
