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Liability Insurance

is the foundational insurance policy for every small business
owner. Most business owners are primarily concerned with protecting their
assets from fire theft vandalism etc… Liability insurance will directly and
indirectly protect these assets as well as most all of your assets from losses
from lawsuits and claims. The commercial general liability insurance policy is
typically the name of the type of insurance policy used countrywide for both
large and small businesses.


Sometimes this coverage can be within a package to policy
which covers liability, property, loss of income coverage, Worker’s
Compensation, and other coverage. This policy can also be written standalone,
meaning it can be the only coverage that you purchased. Specifically this
policy covers you and your business from bodily injury and property damage
claims from third persons. These claims must be of an accidental nature and not
intentional, as intentional acts are not covered. At a bare minimum this policy
will cover your liability claims for premises only. This is very basic coverage
and is usually not in your best interest to have premises only liability
coverage. It is much more prudent to also expand the coverage for your products
and/or completed operations exposures. These latter coverage can be on or off
premises depending on the services that you are providing and the products that
you are selling. If the industry that you are in tends to be more of a high
risk industry from an insurance underwriting standpoint, many times the
underwriter will only issue a liability policy for premises only. While this is
better than nothing, it will more often than not leave gaping holes in your
insurance coverage.


Typically the liability
policy is written with an occurrence limit of let’s say $1
million and an aggregate limit of $2 million. Usually whatever limit you pick
for the occurrence is doubled for the aggregate limit. Underwriters will
sometimes issue your policy with the same occurrence limit as you have for the
aggregate limit. The danger in doing that is that if you have one dollar of
claims paid out you will no longer have the million dollar coverage. The
aggregate limit represents the total amount of coverage that is available in
your policy year. Any claims that are paid out during that year reduce the
aggregate. So if your aggregate limit is the same as your occurrence limit any
claims that are paid start reducing not just your aggregate limit but also your
occurrence limit. This can cause havoc with your certificate holders as if you
have any agreements promised to have certain insurance limits they will be
reduced if you have any claims paid. Liability insurance is just the start of
building your insurance portfolio. It is the primary building block for
crafting a comprehensive and complete insurance portfolio for your small
business. There are many enhancements and additional coverage that can be
added to this policy as appropriate for your exposures to loss. We have further
articles explaining these enhanced coverage on our website.

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