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General Liability insurance is a type of business insurance that protects an entity’s assets and finances against various general liability risks. It provides coverage for claims such as bodily injury, property damage, personal injuries, advertising injury or defamation (or other intellectual property) in connection with the ownership or operation of any legal enterprise.
The “6 General Liability Limits Every Business Owner Should Know” is a blog post that discusses general liability limits. The article discusses the different types of coverage and what they are for. Read more in detail here: $1 million per-occurrence $2 million aggregate cost.
The policy and declarations page of every business general liability insurance policy have stated limitations. Understanding these limitations is crucial for ensuring that you have sufficient coverage in any particular location and are sufficiently protected against danger.
In a general liability insurance, there are six specified liability limitations.
1. Aggregate in general
The general aggregate limit is the maximum amount that an insurance policy will pay for claims throughout the course of the policy’s coverage term. The general aggregate limit applies to the following items:
- Body injury or property damage (Coverage A)
- Personal and advertising injury is covered under Coverage B.
- Medical costs are covered under Coverage C.
The general aggregate limit applies to a single big claim or a group of lesser claims that add up to the maximum amount. The insurance carrier will not pay any further cash for claims after the aggregate limit has been reached for the policy period; any subsequent claims are the responsibility of the firm.
This limitation does not apply to claims deriving from product-completed operation dangers, which usually have their own limit.
Example of a General Aggregate
Assume you have a $2 million general aggregate limit and a $1 million per occurrence limit on your insurance policy. Assume you have three $800,000 claims in a calendar year. A total of $2.4 million has been claimed. If your aggregate limit is merely $2 million, you’ll be responsible for the extra $400,000 if the claimant prevails.
2. Occurrence-by-Occurrence
An insurance company will only pay a certain amount for a single claim. This is referred to as the per-occurrence limit, and it is stated on your insurance policy’s declarations page. The per-occurrence limit is often half of the total limit.
This implies that if the overall maximum is $2 million, the per-occurrence limit might be as low as $1 million. Every insurance company and policy is different, so be sure you know what your coverage’s maximum is. When the per-occurrence limit equals the aggregate limit, the number of covered incidences that a policy will pay on is severely limited.
When a loss occurs, the per-occurrence limit reduces the amount of the aggregate limit by the claim amount.
Example of Per Occurrence
Assume you have a policy with a per-occurrence limit of $1 million and a general aggregate limit of $2 million. If a claim is worth $1.1 million, the insurer will pay $1 million based on the occurrence, the company will most likely be responsible for the difference, and the aggregate for the policy period will be reduced from $2 million to $1 million as a result of the amount utilized.
3. Operations that result in the completion of a product
The maximum amount that will be paid based on liabilities from finished or manufactured items is established by the product-completed operations limit. The loss must occur outside of the company activities for this coverage limit to be triggered. This restriction has no bearing on the overall aggregate limit and is self-contained. As a result, claims that satisfy the general aggregate limit plus a product-completed operations limit are feasible.
Example of Product-Completed Operations
Consider a general contractor who has a $2 million general aggregate limit plus $1 million for product-completed works on his general liability coverage. If a contractor-built staircase collapses, resulting in $800,000 in injuries, the product-completed operations limit would cover it with $200,000 in claims left over. The general aggregate limit, which is unaffected by this claim, would remain at $2 million.
4. Personal & Advertising Injury
When someone charges you of libel or slander, this is referred to as personal and advertising harm. The occurrence limit for this coverage is independent of the normal per-occurrence restriction. The personal and advertising injury cap applies to each individual claimant, not the whole incident. As a result, if more than one person was wounded as a result of an occurrence, each individual would be eligible for compensation up to the coverage level. When a claim is lodged, however, it reduces the overall aggregate limit.
Personal & Advertising Injury Example
Your general liability coverage includes a $2 million aggregate maximum and a $500,000 personal and advertising injury limit. You make a remark on Facebook regarding a competitor’s services, and the comment gets viral. Because of the post, the rival loses business and alleges that your allegation is false, and your company is sued for $300,000 for libel. The personal and advertising injury limit pays for your defense in this case, and the aggregate limit for the year is reduced by $300,000.
5. Damage to the rented premises
Many entrepreneurs that rent commercial premises must get liability insurance. This coverage need is often set at a minimum of $1 million per event, with each event contributing to the overall total. It’s not the same as the per-occurrence limit, but they sometimes have $1 million restrictions in common.
When there is damage, this coverage restriction is activated. Fire is the most common cause of damage, although vandalism, broken pipes, and other risks that cause damage to the rented structure are also covered.
Example of Damage to Premises Rented to You
Assume you have a $2 million general aggregate insurance with $1 million in coverage limits for damage to leased premises. When a microwave in the break room catches fire, it causes a little fire. The sprinklers activate, and the fire service comes to ensure that the fire has been extinguished.
While a commercial property insurance covers your items, damage to the walls, floor, and ceiling is covered by the coverage for damage to premises leased to you. If this sum is $300,000, the total yearly amount is reduced to $1.7 million.
6. Medical Bills
This is a kind of no-fault insurance that pays for medical costs and first assistance for anyone who are injured while on the premises. It covers reasonable charges up to the policy’s medical expense maximum. When a claim is filed, the aggregate limit is reduced by the amount of the claim.
Example of a Medical Expense
Assume you have a $2 million general aggregate limit and a $1 million medical expenditure limit. An elderly guy slips and falls in your restaurant, breaking his hip and requiring an ambulance. Your insurance will cover the cost of transportation as well as any medical expenditures incurred as a result of the fall, up to the policy maximum of $1 million. The claim amount is also deducted from the aggregate limit.
Conclusion
Understanding whether general liability insurance is necessary, as well as the policy limitations, will help you ensure that you are adequately insured against a variety of dangers. Review your insurance policy with your agent to make sure you have enough coverage and to enhance it where you believe you have the highest risk. Keep in mind that if a claim exceeds the restrictions, your company and you may be held liable for the difference.
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