Liability Insurance – Guide for Businesses

Liability insurance, which is also known as third-party insurance, is a part of general insurance, which protects the insured person or entity against liabilities imposed by lawsuits and claims of third parties. Simply put, general liability insurance allows you to protect yourself from accidents, injuries, property damage, and other liabilities that may easily and quickly cripple your business.

Usually, this type of insurance covers the most common and basic risks in business. And even though there are plenty of commercial insurance types, liability insurance is the foundation for those insurance types and is (almost) always included in the insurance. In this article you can find answers to the most common questions about general liability insurance.

What Does Liability Insurance Cover?

Typically referred to as CGL (commercial general liability), this type of insurance protects you and your business against lawsuits and claims by third parties. Such claims usually imply financial losses of third parties for which your business is held responsible. Depending on the type and scope of insurance, usually CGL covers the following accidents and circumstances:

  • Property damage. An example of such a claim would be a lawsuit from your landlord, who claims that a fire that started in your office also damaged part of the building, as a result of the incident.
  • Bodily injury. Typical claims include falls and slips that happen on the property of your business and that result in the bodily damage of third parties.
  • Reputation damage. This applies to the statements that might negatively affect the reputation of a particular individual or entity.
  • Copyright infringement. If someone filed a lawsuit against you or your business on the ground of copyright infringement (if you, for example, unlawfully use designs and materials of a third party), the insurance company should protect you from such claims.

Do I Really Need a Liability Insurance?

Any type of business or enterprise is a risky venture, and you never know what will happen in the next moment. Such an insurance protects your business against claims and lawsuits (which might cripple your business otherwise) for quite a moderate fee. Just imagine what if an accident happened on your enterprise and you have to pay for it? This type of insurance is designed exactly to cover such cases.

What Should Be the amount of Coverage for My Enterprise?

Before you will purchase the CGL, this is one of the key questions you should consider before rushing to the insurance company. And even though it is essential for your business to have the right kind of insurance policy, it is also necessary to have the adequate coverage.

There are a variety of factors that determine the price and the coverage limit of such an insurance, such as the enterprise’s nature of business, location, industry, and the perceived risks of daily operation. Also, that depends on the size of your enterprise. Typically, small enterprises get an insurance with the $1,000,000 limit per claim and up to $2,000,000 in total.

Yes, the higher will be the cover limit, the higher will be the insurance premium. However, it is crucial to get the adequate levels of coverage, since anything beyond that will be covered by your business.

Is There a Way to Reduce CGL Cost?

While this type of insurance was designed to protect you against unexpected events, you, as a business owner, should do your best to minimize the risks and hazards that might get your company into trouble. That will not only help you to minimize the chance of such law hassles connected with your business, but it is likely to lower the premium on your insurance.

It is also noteworthy that the claims history also affects the level of premium. So, if you have a long claims-free history, you are likely to enjoy pretty moderate premiums. Here are some of the tips to lower the liability risks of your business:

  • Make sure the lightning is adequate
  • Maintain a safe environment in your enterprise
  • Keep walkways and floors dry, in good condition
  • Make sure that the exits are well-marked and don’t have hindrances
  • Do not try to damage anyone’s reputation
  • Don’t use offending words towards others
  • Don’t make offending posts and comments on the internet
  • Provide detailed information about products
  • Always test and verify your products
  • Post warning signs at potentially unsafe areas.

Liability Insurance