Posted on May 17, 2014

General Liability Insurance

General liability insurance

Liability insurance protects businesses from the potential catastrophic losses that lawsuits may cause. Carrying enough liability insurance to protect from financial loss due to injury, death or property damage caused by a company's products, employees or operations is vital to keeping those businesses operational. Generally, commercial liability coverage provides legal defense costs and pays court awarded damages up to the policy limits when a company is help financially liable for a claim.

Two Coverage Types included in General Liability Policies

General liability policies provide by far the most comprehensive amount of coverage in one contract. The common liability coverages contained within these policies are premises & operations and products & completed operations.

Premises & Operations - this general liability coverage will pay for bodily injury claims of customers or other third parties who experience an accident on business premises or because of business operations. This liability type will also pay for property damage caused by a business owner or employee on or off site.

Products & Completed Operations - this portion of general liability insurance policies takes care of any liability from products made, sold or distributed to customers as well as any claims caused from completed or abandoned business operations.

Liability insurance also provides coverage for personal injuries caused by slander, libel and false advertising. It will pay for medical expenses for injured parties except for employee injuries, which are covered through workers compensation, temporarily disability and/or health insurance.

How General Liability Policies Pay Claims

Liability coverage can be written on an occurrence or claims made basis. Occurrence basis policies pay for claims that happen or occur during the policy period. It makes no difference when the claim is reported even if reported after the policy has expired. Conversely, claims made basis policies only cover claims that are reported during the policy period. When a claims made policy expires, business owners may purchase tail coverage that will cover any claims that are reported after the policy's expiration.

Legal Damages

When customers or visitors file lawsuits, they can seek one of three types of damages that general liability insurance will cover if a company is held financially liable:

  • Compensatory - injured party's current and future losses caused by injury.
  • General - pain & suffering or mental anguish losses claimed by the injured party.
  • Punitive - penalties business owner must pay.

General liability insurance provides overall protection for companies from a wide range of risks. Without proper liability coverage, business owners face paying the expense of lawsuits and claims out of pocket. Because these expenses add up, uninsured companies face potential financial devastation and business closure. Liability insurance can give business owners peace of mind and security that their assets and operations are well protected.

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