A business owner has the choice of buying general liability insurance separately or as a part of a business owner’s policy or BOP. A BOP ties liability insurance with property insurance into one policy, however the limits of the liability insurance are often quite low. Companies that require more coverage normally buy their liability insurance separately to ensure that they are adequately covered.
How much general liability coverage should a company have? That depends upon a couple of things – perceived risk and the state in which your company is located. A company owner must first decide on the amount of risk there is associated with his/her business. For example, a company that manufacturers large boat motors is at greater risk of facing lawsuits than a company that makes blankets and would therefore require more liability coverage. Some states in the U.S. are known to award large damage amounts to plaintiffs. Companies operating in these states should have high coverage amounts.
How general liability insurance works is like this: The insurance company must cover the legal costs of the company when it is sued. The claims that are covered include bodily injury, property damage, personal injury and advertising injury which is damage done from slander or false advertising. The insurer also must cover any compensation paid to plaintiffs as well damages.
Any general liability insurance policy will clearly state what the maximum amount is that the insurance company will pay per event. For example, if a business has a $500,000 cap on its liability coverage and it is successfully sued for $600,000, the insurance company pays the $500,000 and the business must pay the other $100,000. In order to handle this type of case, many businesses buy ‘umbrella’ liability insurance which takes care of the excess amounts – in the case of the above example, the extra $100,000.
The typical insurance company requires that a policyholder must immediately report any accidents that may lead to a liability claim. The event also must be very well documented and all summonses and legal notifications must be sent to the insurer immediately upon receiving them. The policyholder also must be fully cooperative if an investigation is ordered regarding the case.
It can be confusing for a business owner to know exactly how much general liability coverage to buy. Having the right amount of coverage may mean the difference between success or failure when faced with an accident or a liability claim. That is why many business owners choose to work with independent insurance brokers. A broker is a ‘go-between’ for businesses and insurance companies. Once a business insurance broker is contacted and the company’s needs are discussed, he/she will search for and find the best general liability coverage for the company in question.
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