In addition to worker’s compensation and property insurance, it’s essential for a company to have commercial general liability insurance.  This protects the business assets should someone sue it for physical injury or damage to property.

This type of insurance can often be bought alone or as part of an insurance bundle known as a Business Owner’s Package (BOP). The choice of which one to purchase depends on the risk factors related to the company’s business operations. Since, on average, the coverage is lower on a BOP, a company that runs a high risk business would be better off with a separate policy.

The amount of coverage a business needs depends on a variety of diverse factors and company owners should carefully consider the amount of risk associated with their business when purchasing insurance.

Since different companies need different levels of coverage for risk, how much coverage a company chooses depends on the level of risk. For instance, a car shop runs a higher risk than a gift shop while an industrial machine manufacturer runs a higher risk than a fabric factory.

Apart from the nature of the business, location, too, plays a significant role in deciding on the amount of coverage to buy. A computer business in Orlando, Florida, exposed to periodic storms blowing in from the Gulf is at a higher risk than a computer business in Denver, Colorado, which is a mile high above sea level.

Moreover, litigation issues are not necessarily a result of geography but also of the culture, with some cities more litigious than others due to socioeconomic reasons. Thus, a business that suspects that it will have to pay plaintiffs a high award because of the nature of the business, its location, or some other factor that affects liability, should aim to get the most protection.

Getting the right amount of insurance will cover a number of liability costs if there is a lawsuit, including:

• Legal expenses related to the defense costs.
• Bodily injury.
• Property damage.
• Personal injury.
• Advertising injury.
• Compensatory damages.
• General damages.
• And any other costs that the business is obligated to pay for under the law.

One thing, however, that an insurer is not required to pay under commercial general liability insurance is punitive damages.

Since it’s possible that litigation may be pursued out of a profit motive rather than because of a serious physical injury, insurance companies ask that even small mishaps be reported immediately. If there is the possibility that the mishap might be used as an excuse for a liability claim, the business has to provide the insurer with accident documentation, as well as forward any legal notices or summons. If there is an official investigation into the alleged accident, the insurer advises the business to fully cooperate with authorities.

A business can reduce the likelihood of a successful liability insurance claim by taking proactive measures like setting a high quality control standard, keeping comprehensive records, training employees in safety drills and other similar measures.

By taking proactive measures to prevent an accident from happening or to provide updated records after an accident has happened, a company can successfully keep down commercial general liability insurance rates.