Understanding General Liability Insurance Limits for Business Owners

If you own a small business, you’ll understand how important it is to mitigate various risks in your everyday operations. General liability insurance is a tool you can utilize to cover some of those risks, such as property damage and bodily injury claims against your company.

How General Liability Insurance Helps Business Owners

Commercial general liability (CGL) insurance can pay for different types of liability issues. It can cover your attorney fees, settlements, and damages awarded to claimants in court. Liabilities covered include:

  • Third-party bodily injury: A customer who’s hurt in a slip and fall accident (or otherwise) in your store can sue your business for medical costs and other damages. CGL insurance would offset these costs to protect your company.
  • Third-party property damage: CGL insurance can cover damages caused by you or your employee while working at a client’s home. It’s a practical safety net for many contractors.
  • Reputational damages: These can include claims of libel or slander based on comments you or your employee made.

General Liability Insurance Limits

Understanding your business insurance policy limits is vital to ensure adequate financial protection against various insured risks. The six CGL insurance limits are:

  1. General aggregate

    This is the maximum compensation your policy can pay for all bodily injury, property damage, advertising injury, and medical payment claims in a coverage period. Assume your policy’s general aggregate limit is $2 million, but you’ve had three separate liability claims amounting to $2.4 million during the coverage duration. Your policy would only cover $2 million, leaving you liable for the extra $400,000.

  2. Per occurrence

    This limit is the maximum figure your policy covers per claim. Consider a per-occurrence limit of $1 million. If an injured customer successfully sued you for $1.1 million, you’d have to pay the remaining $100,000 out of pocket for this particular liability claim.

  3. Product-completed operations

    This limit applies to liability claims related to works completed or manufactured products. Take the example of a $1 million product-completed limit. If a customer injured on your premises successfully sued you for $800,000, your general liability insurance would pay the claim, leaving you with a $200,000 balance. This payment wouldn’t affect your policy’s general aggregate limit.

  4. Personal and advertising injury

    This limit applies to defamation claims against your company. Any related payments don’t impact your policy’s general aggregate limit. Say your CGL policy has a personal and advertising injury limit of $500,000. This would be the maximum amount your carrier would compensate each victim in a defamation incident.

  5. Damage to your rented business building

    The owner of your rented business premises may require you to have this property damage liability protection. In case of fire damage, your policy would cover any necessary repairs to the building. This liability coverage often has a per-event limit of $1 million. Any paid claim diminishes your policy’s general aggregate limit for the year.

  6. Medical expense

    Medical expense business insurance covers the cost of treatment, first-aid, and even transportation for people injured on your premises. It’s a no-fault coverage. Imagine you have a medical expense limit of $1 million on your CGL policy. If a slip and fall injury occurs in your store, your insurer will pay the victim’s medical bills, subject to this limit. The payment would eat into your general aggregate limit for the coverage period.

    With a good grasp of general liability insurance policies and applicable limits, you’re ready to maximize your coverage against various risks. At RMS Insurance Brokerage, LLC, we can help you review your existing business insurance policy to address any coverage gaps. Contact us right away to get started!