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Understanding Commercial Property Insurance |
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Along with property and workers compensation insurance, general liability insurance is a must have for most companies. Liability insurance protects the assets of a business when it is sued for alleged injury or property damage.
Liability insurance can be purchased separately or as part of a Business Owners Package, which bundles property and liability insurance into one policy. When liability insurance is purchased as part of a BOP, the coverage limits are generally lower, so higher risk companies that need more coverage may choose to purchase liability insurance as a separate policy. The amount of coverage a business needs depends on a couple of factors. Company owners should first consider the amount of risk associated with their business. For example, a business that manufactures heavy machinery is at a greater risk of being sued than a company that manufactures linens, and would therefore need more liability insurance. Another factor to consider is where your business is located. The volume and success of litigation varies dramatically from state to state. If a business is in a state that seems to favor high damage awards to plaintiffs, they will need more liability protection. Under a liability insurance policy, the insurer is obligated to pay the defense and legal costs of a covered liability claim or lawsuit. Covered liability claims include bodily injury, property damage, personal injury and advertising injury. The insurance company would also pay any compensatory or general damages that the business becomes legally obligated to pay. Punitive damages are not covered under general liability insurance policies because they are considered punishment for intentional acts. General liability insurance policies always state a maximum amount that the insurer will pay during the policy period. Usually these policies also list a maximum amount the insurer will pay per “occurrence”. For example, if a company has a $1 million “occurrence” cap in their liability policy and they are sued and receive a $1.5 million judgement against them, the insurer would pay $1 million and the business would be responsible for the additional half-million dollars. To cover these types of situations, most companies can purchase Umbrella Liability Insurance, which would cover payments in excess of the policy limits and provide coverage for liabilities not covered in a standard liability insurance policy. In today’s litigious society, even small mishaps can result in a lawsuit. For this reason, most insurance companies require their policyholders to report any accidents that could lead to a liability claim as soon as possible. The insurer may then require the business owner to document the situation, forward all summons and legal notices and cooperate fully in any investigations. Taking precautions before an accident can help to keep insurance rates down. Following are steps businesses can take to lower the chance of a liability insurance claim:
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