When putting together your business’s liability insurance portfolio, you will need both foundational coverage and expanded benefits that are customized to your particular operation. To get their benefits started, most business owners purchase commercial general liability (CGL) insurance, which is foundational coverage, and which can be augmented by additional, separate liability policies.
Let’s take a closer look at liability insurance, how it works, and the different types of plans that your business might need. In the end, you will be able to use this coverage to maximize your company’s financial security in case of a challenging event, and this coverage can make sure you do so.
What is liability insurance?
When you buy liability insurance, you buy coverage to protect you against the ramifications of your own mistakes or negligence. But you do something wrong in your business, then someone else like a client, employee or other third party could be the one who sustains harm. Therefore, liability insurance doesn’t pay you directly, but rather helps you make remittance to someone else impacted by your mistakes.
Still, even though you might not receive a settlement yourself, liability insurance is still good to have. After all, someone who feels that your mistakes caused them harm could sue you. It could be a challenge for your business to fight the suit, overcome these problems and to remain open. Massive financial challenges could arise.
However, if you have liability insurance, then you have resources available to help you combat these issues. It can cover both a settlement for the affected person, and even cover your own legal expenses related to the suit. You will generally start your policy package with CGL benefits, but you can also buy expanded coverage for unique liabilities. Just a few of the risks covered by CGL policies are:
Anyone could get hurt in any business. Even if you are a CPA, lawyer or other professional, then someone could still visit your office for a consult, slip in a puddle caused by a leaking water fountain, and break a bone. They might sue you for medical bills, lost income and other suffering. Your general liability insurance plan will usually cover these losses.
Additionally, many CGL policies include an extra benefit called accidental medical payments coverage. If someone gets hurt in your business, then this coverage can compensate them even if the business was not at fault for the injury.
General liability insurance also accounts for scenarios where you damage other people’s property. For example, you might visit someone’s house to repair their plumbing, but might not realize that you left the water running in a sink, and wind up flooding the home. This coverage can ensure you can compensate that customer for their losses.
Something you make could be hazardous to the person who buys it. For example, your hand-made coffee cup might have a flaw in it. It could shatter, spilling a burning liquid on the user. As a result, they might sue you, because you are the person who made the cup. Even if you followed a strict quality control process, then you can still use this coverage, because you never know when a problem might happen.
A completed-operations liability is one that appears after you think you have completed your work for a client. For example, you might make repairs to someone’s roof, but though you think the job came out perfectly, the roof might wind up partially collapsing a few days after the issue occurs. In these cases, because your negligence caused the problem, you will have to compensate this person.
A personal injury is one that doesn’t physically harm someone, but rather causes them harm in other ways. For example, a competitor business might sue you because they claimed your advertising wound up libeling them. Or, a customer might sue their hairdresser if word gets back to them that the hairdresser insulted their choice of cut. These results can prove hurtful and financially harmful in the right situations, and as a result, your business might have to pay up.
Other Liability Insurance You Might Need
Because general liability insurance is foundational, there are many other policies that you might need in order to obtain a sufficient level of protection. More specific liability coverage includes:
- Employment practices liability insurance
- Errors & omissions coverage/Professional liability insurance
- Directors & officers coverage
- Hired/non-owned auto liability coverage
Industry-specific liability insurance might also be necessary. For example, doctors are usually required to buy malpractice insurance, and establishments that sell liquor must usually have liquor liability insurance.
Additionally, your general liability insurance will include policy limits that establish a maximum dollar amount that it will pay for a given claim. However, if a lawsuit settlement exceeds that limit, then your policy will not increase to cover the outstanding value. To get that extra coverage, you will need to invest in commercial umbrella insurance, which can provide additional liability assistance once a claim surpasses the value of a CGL policy.
If you are concerned about what general liability insurance your business needs, then don’t hesitate to contact us. Our agents are knowledgeable in all lines of lines of liability policies, and we’re committed to helping you determine the policies that are best for you.