Unraveling the Mystery of General Liability Insurance: What Every Business Owner Should Know

Running a business is always risky. It is so because it involves extensive labour and working in high-risk conditions. Business owners often buy a business insurance policy to protect themselves from risks. General liability insurance is a type of commercial liability insurance. It protects you from the third-party liabilities. It also provides coverage for reputation harm, and copyright infringement.

What does general liability business insurance cover?

A general liability insurance policy covers the physical injuries inflicted to a third-person inside your company premises. It also comes to your rescue when a third-party claims for the property damages. In short, it protects you from the third-party liabilities due to which your company can get sued.

Suppose that you have used a copyrighted image of a photographer. He can sue your business for using the image without his consent. General liability insurance also covers the property damage claims filed by a landlord for your rented property. General liability insurance coverage includes the legal costs required to defend your business. It proves to be of great help when a client files a lawsuit against you for dishonesty or defamation.

Why general liability insurance is required?

The claims filed by the clients and other third-parties for physical injuries or property damages can cost you in millions. You may not have enough resources to cover the legal expenses. The losses are more severe if you have to compensate the clients due to the court’s verdict. A comprehensive general liability insurance policy provides coverage to these expenses. It saves you from paying the losses from your pocket.

Suppose that you run a construction business. Property of your client may get damaged while carrying out some construction work. Or else, a family member of your client may get injured due to negligence of one of your workers. In both the cases, your client can sue you and claim compensation for the damages. The general liability insurance will protect you from these claims.

A general liability insurance policy is cheaper than a commercial property insurance plan. It is because it does not cover your own property damages. It also does not cover the physical injuries sustained by your workers or employees at work. It is perfect liability insurance for small and medium-sized businesses. The business that cannot afford to avail many insurances or a comprehensive business insurance policy to cover their business risks can also get it.

A general liability insurance plan also protects your business from the defamatory lawsuits. For instance, the cases of slander and libel filed by a third-party are covered under this policy. The losses caused due to such incidents can hamper the regular operations of your company. Get the best general liability insurance to protect your company from these losses. It will enable you to carry out the regular business operations without any worries!

Key Features of General Liability Insurance 

1. Extensive coverage: A general liability insurance policy provides an extensive coverage to your business from third-party claims. It covers the legal expenses incurred to defend advertisement injuries, defamatory cases, and other claims that affect the reputation of your business. The bodily injuries and property damages claimed by a third-party are also covered by this policy. Further, any damages caused due to your products, services, or business operations are also covered under general liability insurance. 

2. Copyright infringement cover: If someone claims that your business used their intellectual property or work for your own marketing or advertisements, it can be included in general liability insurance coverage. 

3. Advertising injury cover: If other parties find your advertisements to be defamatory or insulting, they can file a lawsuit against you. The legal expenses borne to defend such cases along with the compensation (if ordered by the court) will be covered under this policy. 

4. Privacy intrusion: If you use a photograph of a celebrity or known figure intentionally or unintentionally in your advertisements, they can file a lawsuit against your business. A general liability insurance plan will protect your business from the liabilities filed due to such instances. 

5. Coverage for reputational harm: You may say something derogatory about other businesses while giving an interview or speaking from a public platform. The reputational harm can affect their business and they can file a legal claim against your company. A general liability insurance policy will come to your rescue and protect you from the financial losses suffered due to such claims. 

Characteristics of General Liability Insurance 

1. Limit of liability: Limit of liability is the maximum amount covered by the insurer when you raise a claim. A bigger business needs wider coverage. As a result, the sum insured i.e. limit of liability also increases.

2. Product recalls: Product recall liability covers the expenses incurred after recalling defective products. It is generally offered as an add-on cover with general liability insurance. Yet, some comprehensive general liability insurance policies may include this coverage by default.

3. Coverage territory: Coverage territory refers to the geographical area that insurance covers. The coverage territory is to be selected as per the extent and nature of your business. Suppose that you conduct business across the country. Now, you can get general liability insurance with a countrywide coverage territory

Types of General Liability Insurance 

1. Directors & Officers Liability Insurance: Claims filed by suppliers, customers, shareholders, employees, suppliers, and other stakeholders can be covered by this type of general liability insurance.

2. Product liability insurance: It covers the property damages or physical injuries caused by the products of a company. 

3. Trade credit insurance: The trade credit insurance will protect your losses caused when your clients fail to return the payment in exchange for your products or services. It usually happens due to credit risks like bankruptcy, insolvency, or protracted defaults. 

4. Commercial General Liability Insurance: General liability insurance does not cover losses or damages caused by products or services. However, a commercial general liability insurance policy covers the premises, products, operations, and even completed operations. Therefore, it offers a much wider coverage than general liability insurance. 

General Liability Insurance Plans Available in India 

Inclusions & Exclusions for General Liability Insurance 

What’s covered?

• Your clients or customers might get injured or while after using your defective products. They may also suffer from property damages due to your products. The general liability insurance covers the liabilities caused due to such events.

• It covers the damages to surrounding properties during your ongoing business operations.

• Copyright infringement claims due to use of intellectual property, trademark, etc. without the owner’s permission can be covered under this policy.

• The general liability insurance coverage includes the reputation damages that a third-party suffers due to your public statements.

• General liability insurance also covers the instances when a third-party files a defamation case against your business due to an advertisement. 

What’s not covered?

• General liability insurance coverage does not include the property damages or physical injuries caused on purpose by the insured

• The injuries and property damages caused under the influence of alcohol are not covered by this insurance policy.

• If a third-party suffers from any physical issues/injuries during discharge of contaminants or pollutants from the company premises, it is not covered under this policy.

• General liability insurance does not cover professional mistakes or errors. It also does not cover employee injuries and accidents.

• Punitive damages, fines, or penalties charged by the local government bodies are not included in the general liability insurance coverage.

• The general liability insurance coverage does not include cover for the own property.

• Damages caused due to wars, invasions, and nuclear perils are not covered under this insurance policy.

• Damages caused due to natural and man-made disasters are not covered by default. Yet, a business can get an add-on cover to get protection from these events.

Who needs a general liability insurance policy?

Any business that needs to indulge in frequent interaction with third-party clients, vendors, suppliers, and other stakeholders must get a general liability insurance policy. 

Businesses that are responsible for marketing, promotions, and advertisements of their clients should get it to protect themselves for the advertisement injury and copyright claims. The companies that sell products to the clients or customers can also get this insurance. It will help them cover the damages and bodily injuries sustained by a third-party while using their products. 

A business may suffer financial losses due to a third-party claim filed by their clients due to non-compliance of contracts. Though general liability insurance does not cover contractual liabilities by default, it can be availed as an add-on by paying extra premium. General liability insurance is usually taken by general managers, company owners, managing directors, operations heads, etc. who are directly responsible for conducting the daily business operations. 

Things to consider while getting general liability insurance 

1. Understand business risk exposures: Understanding the risk exposures of your business before getting a general liability insurance policy is important. Suppose that you are conducting business in a rented property. In this case, get general liability insurance with cover for rental property damages. The risk exposures also vary as per the business type and size. For instance, restaurant owners with higher footfalls carry a greater risk as compared to the restaurant owners with fewer daily footfalls.

2. Fix the budget: Do not go for a lower sum insured because it lowers the commercial general liability insurance cost. You can consult an insurance agent or broker to find out the best sum insured and coverage that your business can get without paying a hefty premium.  Before choosing the sum insured and coverage, check things like: 

• Location risks
• Multiple risk locations
• Annual turnover of your business
• Jurisdictions covered by your business 

3. Be prudent while selecting the deductibles: A higher deductible may lower the insurance premium but it will also increase your out of pocket expenses during claims. As a result, you must choose the deductibles providing enough coverage without increasing your policy premium.

4. Coverage scope: A regular general liability insurance plan provides cover for third-party damage, reputation harm, and advertising injury. Seek a wider coverage if your business demands more coverage due to higher risk exposure. For instance, you operate the business in many locations. In this case, you may need a wider coverage to insure all the business locations.

5. Check the exclusions: Check the list of exclusions before getting general liability insurance. It will highlight the areas that are not covered by your insurance. This will help you to add other covers for getting protection for those areas. For example, professional services are not included in general liability insurance coverage. Get a professional indemnity cover along with a best general liability insurance policy. Together, they will provide complete protection for your business.

How to claim general liability insurance?

Follow these steps while claiming for general liability insurance:

Step 1: Contact the insurer immediately 

If a third-party files a claim for property damages or bodily injuries, contact the insurer immediately and provide them with the details of the claim. 

Step 2: Provide the policy details 

The insurer will ask for your policy details like policy number, name registered with the policy, etc. and create a case for claim settlement. 

Step 3: Fill the claim form & submit documents 

The insurer may ask you to fill the claim form with all the relevant details. You may also submit the documents that support your claim. 

Step 4: Appointment of the surveyor 

Once you submit the claim form and documents, the insurer will appoint a surveyor for verifying the details of the claim. The surveyor may visit your business premises for inspecting the nature of damage or bodily damages caused to a third-party. After that, he will create an inspection report that comprises the extent of damages or bodily injuries along with prediction of the expenses caused by them. 

Step 5: Claim settlement 

The insurer will finally process your claim request and decide the sum insured to be provided to the insured. You need to be patient and cooperate fully with the insurance company till the claim gets settled. 

Documents required for verifying the claim 

The following documents can be submitted to verify your claim:

• Duly filled claim form 
• Legal notice or claim letter issued by your client/customer 
• A copy of the insurance policy document
• FIR report (if filed by a third-party)
• A written statement explaining the nature of the loss, location, claim type, etc. 
• Inspection or surveyor report
• Other documents that the insurance company asks while processing your claim

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