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Commercial General Liability Insurance in 2022: A Complete Guide

Commercial general liability insurance is a form of business insurance that offers coverage against claims of injury, property damage, and illness filed against your organization. It mainly comes in handy to cover claims filed by members of the public against your business.

These claims could be as severe as a child hurting themselves with a defective toy you sold. Or they could be as benign as you accidentally spilling tea over a client's laptop. But since you can't predict the future, purchasing general liability insurance is your best bet.

Here's what we'll discuss in this article:

  • What does CGL insurance pay for?
  • What does general liability insurance cover?
  • What does it fail to cover?
  • Types of CGL insurance policies
  • Differences between public liability and general liability insurance
  • How much cover do you need?
  • How much does general liability insurance cost?
  • Should you purchase general liability insurance?

What does Commercial General Liability Pay for?

Provided a customer has sued you, your commercial general liability policy can cover:

  • Attorney fees
  • Evidence and document gathering costs
  • Medical payments and settlements
  • Judgments

These expenses can add up, especially if the lawsuit against your business takes a long time to get resolved. And even if the case is dropped, you'd still have to deal with legal defense costs, like your attorney's fee. That's why having commercial general liability insurance is essential.

What does Commercial General Liability Insurance Cover?

Difference commercial general liability policies offer different levels of coverage.

Some policies may offer premises coverage, which protects your organization from claims arising from events that occurred on its premises during regular business hours. Other policies may provide cover for bodily harm and damage that a finished product or service did at another location.

Still other policies can cover claims arising from advertising injury and/or personal injury, such as slander or libel. All these claims are more common than the average businessperson thinks. Only a comprehensive general liability cover can keep your business protected from them.

What does it fail to cover?

Here are damages most CGL policies do not cover:

  • Expected or intentional damage caused by the insured.
  • Damages caused due to intoxication (common in alcohol-related businesses)
  • Additional liability that the insured might take on
  • Damage caused by automobiles or other vehicles
  • Employee injuries or illnesses arising out of their work

Types of CGL Insurance Policies

Before purchasing commercial general liability insurance for your business, make sure to pick the policy that is right for your circumstances.

Claims-made policy

A claims-made policy offers coverage regardless of when the claim event happened. This policy provides coverage whenever a claim is made against it. Bear in mind, though, that it will only cover those claims that are made when the policy is active.

This policy might be better for you if a) you run a small business on a tight budget and b) you have no intention of canceling your policy in the near future. In addition, claims-made policies typically have lower initial premiums, making it easy for most business owners to afford them.

Occurrence policy

An occurrence policy will cover claims filed on events that happened during the life of the policy, even if that policy is no longer active. This distinguishes it from claims-made policy, which provides benefits on claims made when the policy is active.

If you value your peace of mind, this policy might be better for you. Occurrence policies are less hassle because they let you file claims on your previous policies, something you can't do with a claims-made policy. Plus, you are granted a new aggregate limit on every policy renewal.

Differences between Public Liability and CGL Insurance

Public liability insurance only covers injuries suffered by members of the public while they were on your business's premises. CGL insurance policies, on the contrary, might cover visitor injuries, defective-product damages, and off-site injuries.

Given that they offer much more extensive coverage than their public liability counterparts, it shouldn't be a surprise that CGL insurance policies will weigh much heavier on your pocket. That said, they justify their higher premiums with a broader coverage.

Which of the two should you choose, then? If you're a small business on a tight budget or you're a restaurant or any company that regularly sees customers at your premises, PLI is essential for you. Otherwise, CGL insurance might be a better option.

How much Cover do you Need?

To decide how much cover you need, consider the maximum claim that might be filed against your business in a worst-case scenario. You can do this by examining the type of work you do and the level of risk it exposes your business to.

For instance, if you run a restaurant with a large number of daily customers, you might need a bigger cover from your CGL insurance than a businessperson with a paper factory. Put simply, any business with a large daily influx of visitors might need a bigger cover.

How much does CGL Insurance cost?

Unfortunately, there is no single cost of general liability insurance that applies to every business. The amount of money you'd have to pay in monthly premiums will depend on the size of your business you want insured, the riskiness of its operations, amount of coverage you want, among other factors.

Should You Purchase CGL Insurance?

Every type of business could do with commercial general liability insurance.

Even if your organization's front doors are always locked to the public, someone could still hold it liable for damages. For instance, businesses that run social media campaigns can face lawsuits if they post anyone else's content, or make a false claim about a rival business.

Even if the lawsuit against your business is frivolous, you'll still have to pay legal defense costs, such as an attorney's fee. Only by purchasing commercial general liability insurance could you be sure that you have done what you could to save your business from potential bankruptcy.

 

Pitsas Insurances

September, 2022


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