Commercial General Liability Insurance or CGLI is a holistic and admirable insurance policy that secures all types of businesses. In recent times, the dynamics of doing business have evolved. Hence, it is vital to stay insured and ready for any curve balls that may hit a business in this day and age. Thus, commercial general liability insurance acts as an umbrella and protects a business from the debilitating effects of third party claims, lawsuits, and liabilities.
To understand the importance of commercial general liability insurance, let’s look at what a liability means.
A liability means that a company or business owes something to someone else. Essentially, liability also means that a company owes another party an obligation that has not been fulfilled or paid for. The world of business runs on transactions both legal and financial. Therefore liabilities can take both legal and monetary forms.
What is Commercial General Liability Insurance?
In a nutshell, Commercial General Liability Insurance is a distinct type of policy that protects businesses from claims of harm, personal bodily injury, advertising, or damage to the property of the customers.
Furthermore, this policy covers claims of defamation, injuries, and damages that occur at the business’s premises, due to its products, mechanisms, or services.
However, commercial liability insurance does not cover all risks and claims that can befall a business.
Nevertheless, it does manage to strengthen businesses and protect start-ups, new ventures or small scale factories from every day unfortunate incidents and lawsuits.
Moreover, this gives a sense of security to businesses, allowing them to focus on expanding and growth.
For example, here is a scenario that will help the reader understand the benefit of a commercial general liability policy:
- Let’s say a customer is shopping at a grocery store and something falls on him and he gets hurt.
- The customer can then claim medical or hospitalization charges from the owner of the store as he got injured in the store.
- It is important to note that the damage to his body took place on the store property therefore the owner is liable to pay.
- This is where commercial liability insurance coverage comes to the rescue.
- The medical or hospitalization charges for the claim made by the customer will be paid from the insurance policy and not by the owner of the store.
This is a simple but effective example to demonstrate the security a business gains from a commercial general liability insurance policy.
Legally, a business is not required to have a commercial general liability insurance by the government.
However, it does prove to be useful when questioned regarding liability policies by lawyers, government officials, suppliers, customers and other stake holders.
Furthermore, it helps build a secure and wholesome image of any type of business.
Comprehensive Commercial General Liability Insurance has Different Levels of Coverage:
The business owners can choose the different levels of security they require and create comprehensive commercial general liability insurance for themselves.
In some cases, a policy may cover the claims that take place at the physical premises of a company during routine operating hours only.
Or, it may cover the damage done to a customer’s property due to the services or product features installed in a location other than the business premises.
Moreover, excess commercial liability insurance coverage that may not be in the original policy needs to be purchased separately.
Furthermore, every policy has a certain amount of commercial general liability cost.
This represents the average amount any business will have to pay every year or monthly to be eligible for a commercial general liability insurance cover.
However, before any payment is made every business can ask for a commercial general liability quote.
As a result, they will be given a detailed quotation of the amount of payment to be made and the commercial liability limits for their cover.
A commercial general liability insurance limit is the maximum amount the insurer will pay on behalf of the business.
As a standard there are 6 different limits on a comprehensive commercial general liability insurance.
Two Types of Commercial General Liability Insurance for Businesses
Considering purchasing a commercial general liability policy?
Well there are TWO aspects to consider:
New businesses must know how to differentiate between TWO types of commercial general liability policies.
- Claims- Made Policy
- Occurrence Policy
CLAIMS- MADE POLICY
Claims –made policy is where the business can obtain coverage for whenever the customer makes the claim.
Here the time of or ‘when’ the actual damage or injury happened is not considered.
Whenever the customer makes the claim to the business, the insurer has to provide the coverage and security for that claim.
For instance, claims- made policies are effective when a period of time has passed between the occurrence of the actual event and when the claim was finally reported or made.
However, for the claims- made policy to work and the insurer to issue the coverage the claims made policy must be active or valid.
Some businesses purchase the claims –made policies to make sure that they are able to get coverage even after their other policies expire.
Occurrence policy is when a claim was made due to an unfortunate event and the business owner made the claim at the occurrence of the event.
This type of policy provides coverage for events that have occurred, although the policy may have presently expired.
For instance, let’s assume a business used to have an occurrence policy which recently expired.
And then a claim was made due to an incident on the business premises.
Although the occurrence policy is expired presently, the business owners can still claim coverage for that incident.
Therefore, these 2 types of commercial liability policies seem to secure business from various third party liabilities.
Furthermore, the policies provide coverage for various situations making it feasible for small business to cope with tragic, unfortunate and unpredictable events.
Since, running a business often takes a lot of risks, purchasing a commercial general liability insurance can ease some of the pressure.
Being Additionally Insured
When a business partners or enters into a contract with another company they may need to declare that company as ‘Additionally Insured’.
Therefore, this means that this new company is also insured under their commercial liability insurance coverage.
Usually it’s the partner company that asks to be named as additionally insured.
A new Banquet Hall has decided to purchase a commercial liability policy.
The Banquet Hall later hires or partners with a Beverage Company as a supplier for their events.
Hence, the Beverage Company can ask the Banquet Hall to declare them as ‘additionally insured’ for the time they are in contract with the Banquet Hall.
Despite the fact that the Beverage Company was not associated with the Banquet Hall when the policy was purchased.
They still have the privilege of using protection from the coverage of the commercial general liability policy.