What Is General Liability Insurance?

In today's lawsuit-happy society, even minor accidents can result in large settlements. That's why general liability insurance is essential for most businesses. Liability insurance protects the assets of a business when it is sued for something it allegedly did, resulting in bodily injury or property damage.

Liability insurance can be purchased on its own or as part of a business owner's policy (BOP). When liability insurance is bundled with BOP insurance, liability rates are usually cheaper, but coverage limits are generally low.

Other factors to consider when deciding how much liability insurance to purchase include:

• Perceived risk. Some businesses carry more risk to operate than others.
  • For example, a company that manufactures machinery would carry more risk of bodily injury or property damage than a company that makes envelopes. A company with higher operating risks will want to purchase a policy with higher limits.
• The state(s) where you operate. Some states have a history of awarding higher damages to plaintiffs than others.
  
  • If your business operates in a state that has a history of awarding high damages to plaintiffs, you will want to purchase higher liability insurance policy limits. An insurance agent or broker can provide guidance in this area if you need it.

Stand-Alone Policies

General liability can be purchased by itself as a stand-alone policy or as part of a business owner's policy package. A stand-alone policy does not usually include property coverage, while a BOP package bundles property coverage with a liability insurance policy.

• The biggest advantage of purchasing general liability insurance by itself is that coverage limits will usually be higher than would be possible with a BOP package. Therefore, it is usually advisable for businesses to purchase the insurance on its own.
• The main disadvantage of a stand-alone policy is that its premium is higher than it would be if purchased as part of a BOP. However, it is essential that liability coverage limits be adequate in the event that a large claim or a lawsuit is filed, particularly for small businesses.
• A large settlement that exceeds coverage policy limits could severely hamper a small company financially, or possibly even put it out of business.

A separate policy may be more work on the administrative end than a BOP, but in terms of “the big picture,” it is much better to have a higher policy limit and not need it than to need it and not have it.

For most business owners, a stand alone policy offers more peace of mind than liability insurance purchased as part of a BOP.

Quotes

Perhaps it would be best to start by explaining what general liability insurance quotes are NOT. They are not contracts. You are not purchasing liability insurance by obtaining a quote and the insurance company providing the quote is under no financial obligation to your business at this point in the process. In essence, a quote offers a "sneak preview" of the coverage a particular insurance carrier can provide your business.

Before a quote can be provided, your agent will have to ask some questions to get enough information to obtain an accurate quote. Expect to be asked questions about:

• The nature of your business
• The location of your business
• How long you have been in business
• Your business's claim history (if applicable)
  
• How many employees you have
  
• How many square feet your business location occupies
  
• Does your business do manufacturing on-site?
  
• Do customers come to your place of business?
  
• If your business manufactures a product, what age group uses your product? Children? Teenagers? Adults? Senior citizens?
  
• What do you want your deductible amount to be?
  
• Do you want a medical payments provision?

A quote will lay out exactly what will be included in your policy, should you choose to purchase it. This will include your deductible amount, any endorsements, the types of equipment that are covered, coverage limits, and whether optional coverages are or are not included in the premium price quoted. Quotes are generally valid for a reasonable time to review the policy; ten days is typical. If you decide to purchase a policy, your agent will proceed accordingly.