Commercial Liability Insurance

A Commercial General Liability policy protects a business against financial loss if it is held legally liable for third parties who suffered bodily injury and/or property damage due to the business’s operations, employees, products, or location. Every business needs to have this coverage in order to protect the company’s assets in the event of a large claim. Some businesses are required to have this coverage by the state in which they operate, such as contractors like plumbers, electricians, and handymen. Often times clients can also require this coverage as a requirement to do work for them. It is in every business’s best interests to have a commercial general liability policy regardless of whether they are required to have one, however.

Why Every Business Needs To Have A Commercial General Liability Policy

A large claim could be devastating for a business who didn’t have a commercial general liability policy . Especially for a small business, without a general liability policy, just one large claim against them could easily put them out of business. This is especially important for small businesses which haven’t incorporated as the business owner’s own assets separate from the business could be in jeopardy.

An example of when someone might file a general liability claim against a business includes getting injured on the business’s premises such as by slipping and falling on a wet floor. A business could also be sued if one of their employees damages a person’s property, such as a painter in a client’s home accidentally leaving water running which causes extensive water damage. General liability coverage would also comes into play if someone sues the business claiming their products and/or services were falsely advertised or infringed on their copyrights.

Any business is exposed to liability claims arising from their business activities no matter what type of business it is. General liability on an insurance policy is designed to cover large claims that exceed the insured company’s ability to pay. If it’s a small bill to cover damage an employee caused, for example, a business is probably better off taking care of it without filing a claim as it could increase their premiums more than what the claim cost. An example of this would be if a carpet cleaner accidentally broke a customer’s $200 glass lamp and the business owner needs to replace it.

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The Types Of Coverages on a Commercial General Liability Policy

Bodily Injury & Property Damage

The first coverage on a commercial general liability policy is bodily injury and property damage, both covered under a single limit of liability. This covers the other party’s losses if the business is legally liable for physical harm to a third party or damage caused to their property. The policy will cover, up to the liability limit stated on the policy, the other party’s medical bills and the cost of repairing or replacing their property that was damaged. There can also be compensatory damages that are paid by the insurance company in order to make up for the harm that was caused.

Personal and Advertising Injury Coverage

The next coverage on a liability policy is personal and advertising injury. Claims for this can arise from another party claiming the covered business slandered them, used their advertising idea, wrongfully evicted them, or infringed on their copyright.

Medical Payments Coverage

Medical payments come next on the list. This covers paying for the injuries that a person suffered that the covered business is legally liable for. It will cover the person’s medical bills such as the ambulance, surgery, hospital stay, home nursing care, and funeral expenses. There doesn’t have to be legal action in order to have the medical payments covered which greatly speeds up the process of getting the injured party’s medical bills paid, especially if it’s a relatively minor injury. This coverage differs from the bodily injury part of liability coverage as there isn’t any coverage for legal liability or defense, it just strictly pays medical bills and is provided on a no-fault basis. The next coverage is products and completed operations insurance. This covers the company’s liability if something happens that causes the loss of property or an injury after the job has ended. This usually is a coverage that’s used by contractors who complete a job and later what they did harms their former client.

Cyber Liability and Data Breach Coverage

Another consideration for a commercial liability policy is cyber liability and data breach. Business computer systems get hacked and/or stolen on a relatively common basis which can expose their customer’s private information as well as the company’s own confidential information. This coverage provides assistance to recover the stolen information and provide ongoing data security provided by experts in the field until the problem is resolved or at least mitigated.

The limit of liability coverage on a commercial liability policy is broken down into two parts; each occurrence, and general aggregate. The each occurrence limit is the most that the insurance company will pay for any single claim. The general aggregate is the most they will pay in claims for the period of the policies term, always one year’s time starting on the date the policy went into effect.

Additionally Insured Addendum

Another coverage on the policy can be the company’s clients asking to be put onto the policy as an additional insured. This often happens when a specialty contractor is doing work for a general contractor and the general contractor wants to protect themselves. Whether there is a charge for adding an additional insured depends on the insurance company. The additional insured is provided with an evidence of liability insurance form which shows the policy’s coverages and other information, their name and address, and any legal language they require to have on the form.

Common Coverage Exclusions

Note that a commercial general liability policy excludes damage caused by the insured company’s automobiles; that is only covered under a commercial auto insurance policy. Another exclusion is for acts of professional negligence, such as a dentist making a mistake that normally no dentist would make. In addition to a general liability policy, professionals also need to carry either an errors & omissions policy or a malpractice policy depending on what their occupation is.

Another exclusion on commercial general liability policies is for pollution caused by the business, such as oil in the ground of an auto wrecking business or an industrial company. Businesses with this exposure need to purchase a pollution liability policy. For bars, nightclubs, and other places where alcohol is served they will need to add liquor liability as an endorsement as otherwise that is excluded from a general liability policy. Coverage for injuries an employee of the business suffers is also excluded and is covered under a separate workers compensation policy which is required for businesses to have in all states.

How To Buy A Commercial Liability Policy

It’s best to have a meeting with at least a few insurance agents in order to buy a commercial general liability policy. While there are some agents that only sell personal lines insurance policies, the vast majority can also sell commercial policies. Some are captive agents only able to sell one company’s insurance products while others can get quotes from a number of different insurance companies. When meeting with the agent, the business owner or his representative should discuss with the agent what limits of liability are required or appropriate for their type of business. They can also go over the exclusions and if specialty liability policies are needed such as pollution liability or malpractice insurance.

Some small businesses are best served by just buying a commercial general liability policy but some types of companies are best served by buying a business owners policy, called a BOP, instead. A BOP includes general liability along with property insurance for the company’s building and contents. A BOP also covers business interruption which covers the owner’s loss of income if a fire or other covered claim disrupts their ability to provide their products and/or services. This packaged policy is good for businesses who need all three types of insurance policies as it is generally cheaper than buying them separately.

How Premium Is Calculated On A Commercial General Liability Policy

The main factor of how much a commercial general liability policy costs is what the business does. Each type of business has an industry standardized industry code attached to it. This code determines a large part of the cost of a liability policy as some professions are likely to cause more injuries and/or property damage than other professions. An electrician is much more likely to harm a person or their property than a business that sells musical equipment, for example. Another example would be a company that only delivers equipment is less expensive to insure than a company who also manufactures and installs that equipment. Another factor is how much liability coverage a business needs. A business that only needs $300,000 liability coverage is, of course, going to have a less expensive policy than a company that needs $2,000,000 million in coverage. Another factor is the number of employees as a larger operation is going to have more risk than a company where the owner is the sole member of the company. The location of the business also matters as some areas pose more risk than other do.

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How To Compare Quotes

The most important thing when comparing commercial general liability quotes is to make sure that the coverages are the same. The quotes should all have the same per occurrence and general aggregate limits, for example. Beyond that, it’s pretty easy to compare quotes as commercial general liability policies are rather standardized in the industry. It’s also a good idea to find out if there is a charge for adding additional insured’s to a policy as that can be a hidden expense for people who need to do this as part of their business’s operations.

How to Get The Best Rates on a Commercial Liability Policy

In order to get the best rate on this type of insurance policy it’s best to shop around. At least three agents should be contacted, with preferably some of those being insurance agents who can get a quote through at least a few insurance carriers. The insurance companies set the rates on insurance policies so there’s no need to check with, say, two Allstate agents as they will both come back with the same rate assuming they’re working with the same information.

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