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What is a General Liability Insurance?

A Comprehensive General Liability Insurance is a type of business insurance that is there to help protect you against any claims resulting from any kind of property damage or bodily injury that may be caused by your business operations, its products, or on your premises.

Say a client or a customer came into your office for a meeting, and they missed seeing the "Caution wet floor sign" that was put out and ended up slipping, falling and breaking their arm!  Or, if during a meeting someone in your office accidentally spills water over a client’s phone and damages it.

Sounds awful, right? Well, what is worse is if you are found liable, meaning that you end up having to compensate for the trouble and damages caused!

In situations like these, a Liability Insurance covers you like an umbrella, protecting you from any problems arising out of injuries and damages to people or property. 

Want to know why a General Liability Insurance is important?

1
Between just 2014 to 2017, there were 8,004 accidents in Indian workplaces leading to over 6,300 deaths. (1)
2
Any business operating in hazardous areas has to have a public liability insurance as per the Public Liability Insurance Act of 1991. (2)
3
India has the 6th  largest number of liabilities claims against businesses in Asia. (3)

Why do you need a General Liability Insurance?

A General Liability Insurance, which is also known as a Commercial General Liability (CGL) policy, is a type of insurance cover that businesses need to protect themselves against any legal liability for property damages or bodily injuries to any third party, like your business associates, customers, or clients. But why do you really need it? 

Illness
When you have a general liability insurance, your business will be protected in any situation where some third-party (like your business associates, customers, or clients) makes a claim against you. 
Document
In case your company puts out an advertisement (or any other communication) that includes unintentional libel, slander, or copyright infringement, your business will not have to handle the cost alone.
Savings
With a general liability insurance cover, when you file a claim, and your insurance company will help you or your business to pay for these costs. 
Costs
Having this insurance cover will help your business run more smoothly, as you don’t need to worry about expensive lawsuits

What does a General Liability Insurance cover?

When you get a general liability insurance, you’ll be covered for...

NOTE: Please refer to your policy wordings for detailed information about coverage, exclusions, and conditions.

Bodily Injuries

Bodily Injuries

Covers you in the case of any injury (and in the worst case death) to a third-party person. For example, if they fall or slip on a wet floor.

Property Damage

Property Damage

For when any third-party property is damaged and needs to be repaired, replaced, or renovated.

Personal Injury

Personal Injury

Ensures that you’re covered in case a third-party suffers from any other kind of injury, like defamations, or wrongful entry.

Advertising Injuries

Advertising Injuries

Everyone tries to avoid such situations, but it’s best to be covered in case of any potential losses from things like copyright infringement, or unintentional libel and slander.

Medical Payments

Medical Payments

In case someone is physically injured due to something your business inadvertently did, your insurance will cover any medical expenses for the same.

Types of businesses that need a Liability Insurance

If you’re a business owner and especially if your operations have a lot of interaction with third parties, you might benefit from getting this insurance:

If your business has a lot of interactions with vendors, clients, and customers

For example if you are running a retail shops, like a boutique or, you own a hotel, club or restaurant.

If your business involves a lot of travel to outside sites

Like in case you have a professional photography business, a catering business, or it involves construction.

Businesses that represent a client in any form

Such as lawyers, advertising and PR agencies.

When your business is involved in manufacturing products

This could be any companies that make food (like cakes or snacks), or medical products.

Any businesses that provide professional services

For example, consultants, graphic designers, financial advisers, marketing, and logistics companies.

How to choose the right General Liability Insurance policy?

  • Complete Coverage for all your business activities – Make sure that the insurance policy gives you maximum coverage for all your business activities, whether that is third-party liabilities, advertising injuries, or personal injuries. 
  • Sum Insured – Pick a liability insurance that allows you to customize your sum insured, or limit of liability, based on the nature and size of your business
  • Consider your level of risk – Carefully consider the potential risks your business presents, like for example how many visitors you get, and ensure that the policy gives sufficient coverage 
  • Claims Process – Since claims are really important, look for an insurance company where claims are not only easy to make, but easy to settle too as it can save you and your business a lot of hassle during the claims process
  • Service Benefits – Many insurers will even be able to offer you a lot of extras benefits, like 24X7 customer assistance or an easy-to-use mobile app. 
  • Compare different policies – As a business owner, it’s always great to find ways to save money, but sometimes the cheapest liability insurance isn’t the best option. Compare the premiums and the policy features of different policies so that you can find the policy that is the best for you at an affordable price. 

Things to remember before getting a Liability Insurance

  • Remember to always check what is and is not covered under your liability insurance, read through the terms and conditions so you won’t be surprised by anything later. 
  • Pick the right Limit of Liability; when you have a higher limit of liability or sum insured your insurance premium too will be higher. But don’t choose a low sum insured just to save on your premium rather on the potential cost of any damages for your own peace of mind.
  • Look for the best value by evaluating all the factors together - from the sum insured and premium to the coverage and opt for a liability insurance policy that gives you the best value.
  • Pick the right policy based on nature of your business, for example a retail shop (like a boutique or a grocery store) gets lots of customers, but doesn’t make any products, so they would need a public liability insurance, but not a product liability cover. 

How much does a General Liability Insurance cost?

When an insurance company is calculated your general or public liability insurance premium, they will decide it based on a number of factors, like:

  • Nature of your business – every business is different and its operations have different amounts of risks associated with them, so your premium will factor this in. (For example, a factory might pose more risk to visitors than a bookshop)

  • Type of products – the risk to your business will also depend on the products or services provided by your business

  • Size of your business – generally, the larger your business is, the higher its value. So, your general or public liability insurance premium will also increase

  • Claim history – How many claims your business has made in the past will also be a factor that affects the premium

  • Location – The location that your business is based in will affect your liability insurance premium for the simple reason that, different towns and cities comes with different levels of risks

  • Number of locations – when your business operates in many different locations, it will have a higher level of risk 

  • Estimated turnover – your premium will also be based on the estimated turnover of your business

Other factors that might affect the insurance premium are the environment, occupancy, territorial and jurisdictional exposure, and your business record. And in general, whatever contributes to a higher risk will end up increasing the premium amount to be paid.

What is the difference between General Liability Insurance and Public Liability Insurance?

A public liability insurance is a policy that is quite similar to general liability insurance, but they differ from each other regarding their purpose and coverage. Let’s take a look at public liability insurance vs general liability:

Public Liability Insurance

General Liability Insurance

What is it?

A public liability insurance covers you and your business against any third party injury or damage claims on the premises.

A general liability insurance covers a wider range of incidents, including any injury to a third party person or property at your business.

Coverage

Basically, this covers injuries, damage to any members of the public (or third-parties) on your business premises. This can include customers, visitors, and delivery personnel.

This is a much more comprehensive cover for your business which not only takes care of your third-party liabilities but also covers for you in other situations, like advertising injuries and personal injuries as well as any injuries or damages that take place because of your business's operations.

Advantages

The premium will be slightly lower with a private liability insurance than a general liability insurance.

General liability insurance covers everything that public liability insurance does and also covers personal and advertising injury.

Limitations

This coverage only applies to your business property, so if you or your employees incur any damage elsewhere, like in a client’s home, it may not be covered.

The premium will be slightly more expensive than a private liability insurance.

Common General Liability Insurance Terms Simplified for You

Advertising injury

In case any of your ads (or other communications) unintentionally include any copyright infringement or defamation of someone. For example, if your company puts out an ad or social media post that accidentally insults another company, that could end up damaging their reputation.

Bodily Injury

This basically refers to any physical injury, illness or disease that occur to someone either on your business premises or because of your business's operations or products.

Personal Injury

Any injury APART from bodily injuries, like wrongful entry or any violation of someone’s right of privacy.

Coverage Territory

This is the geographical area that your insurance covers, such as the country or area where your business is located or operates.

Occurrence

This is any incident, or series of incidents, that is happens due to exposure to a harmful condition like a defect or hazard (this could include some injuries and illnesses, or a product recall).

Product Recall Expenses

It refers to any costs that might come up in case there is some incident and any products made by your business need to be recalled, removed, or even disposed of. For example, if your company makes toys, but they need to be recalled because they happened to include some toxic paint.

Third Party

A third-party is any person (or entity) who is not the insured party (i.e., you) and the insurer. It also excludes any other person who has any financial interest in your business or who you contract with. 

Limit of Liability

This is the maximum amount your insurer will be able to cover for you if you make a claim, and is similar to a sum insured amount.

Deductible

With most liability insurance, you will have to pay a small amount out of your pocket before the insurer can pay out your claim. For example, if you need to pay ₹15,000 for a damaged phone, but you have a ₹5,000 deductible, you will need to pay this amount before the insurance company pays the remaining ₹10,000.

Other Liability Insurance Policies

Since, as a business owner, you will be exposed to a wide range of liabilities, it can be important to see what all kinds of liability insurance coverage are available out there (apart from public liability insurance and general liability insurance):

Employer Liability and Workmen’s Compensation

This type of insurance is for employers who want to get coverage for their employees who get injured during the course of their employment at the job.

Professional Indemnity Insurance

This insurance plan is in case you need to protect yourself or your business against claims of professional negligence, errors, or omissions. It is most useful for professionals like architects, engineers, consultants, lawyers, building designers, medical professionals, and accountants.

Product Liability

This kind of policy is there to cover you against any claims that arise from faulty products. If your business involves the production of chemicals, tobacco, medical products, food, or recreational products, it may be beneficial. 

Third-Party Liability

This policy just covers you for any damages or losses that you may cause to a third party (i.e., anyone other than you – the insured person or business – and the insurance company). 

Management Liability

This insurance is there to protect your company’s directors and officers against circumstances that aren’t usually covered under a public or general liability policy, like allegations of wrongdoing, directed at the company’s managers, directors and officers.   

FAQs about Liability Insurance in India