How much liability insurance should your business have? How do you even decide that in the first place? If you’re asking yourself these questions, it’s time to learn about the 6 general liability limits every business owner should know about. Read on to find out more and increase your understanding of what insurance can do for your business, and what coverage you may need in the future.
What is general liability insurance?
Every business needs insurance. This can help protect you and your employees if something goes wrong, whether it’s an accident or a natural disaster. There are two types of business liability: general liability, which protects against things like bodily injury, property damage, and personal injury; and commercial auto coverage for your company vehicles. The first thing to do is to find out how much protection you need. The more at-risk your industry is (e.g., construction), the higher the limits should be in order to adequately cover all potential damages that could occur from one event. You’ll also want to know what kind of deductible applies before signing up with any insurer, as this will affect how much you pay out-of-pocket for claims when they arise (e.g., $1 million per incident with a $500 deductible). The 6 general liability limits every business owner should know about include
Basic limits on property damage and personal injury claims
In the United States, all businesses are liable for the losses and injuries that result from their actions. Many states require some form of general liability insurance to protect business owners from these risks. The amount of coverage required varies by state but in general falls into one of six categories: $100,000 per person/per occurrence, $300,000 per occurrence ($100,000/$300,000), $500,000 per occurrence ($250,000/$500,000), $1 million or more ($1M+), $5 million or more (over $5M) and limits not less than 2 times the limit at a lower category. It is important to note that these rates can vary significantly in different states.
Different commercial general liability coverage limit options
- $500,000 – This is the lowest limit of insurance protection and has a total liability limit that does not exceed $500,000 per occurrence.
- $1 million – Provides protection up to $1 million per occurrence and the aggregate limit is not greater than $2 million.
- $5 million – Pays in excess of the first two limits with a total limitation amount up to $5 million per occurrence and an aggregate limit that is not greater than the previous one but still lower than the following option-
- $10 million – Covers up to $10 million per occurrence and aggregates for a combined maximum of $15 million.
- 10/20/30/50 Million- Larger businesses can find coverage for more than five million dollars worth of general liability coverage; this protection comes with an increased premium which may be offset by a higher deductible on certain types of claims such as property damage or bodily injury (in which case it’s important to have your risk management team review the policy).
Liability limits in different states
In California, a business is required to carry a minimum of $750,000 in liability coverage. This amount only covers bodily injury and property damage that was caused by an accident. If you cause any injuries or property damage intentionally (known as intentional torts), then your liability limits need to be much higher, at least $1 million per claim. Most people think of general liability coverage as an optional expense because it is not required by law like workers’ compensation coverage is, but this coverage should never be overlooked. There are many things that can go wrong with your business even if you’re careful and take precautions, so protection from liability is essential for any successful business owner.
Things every business owner should know about commercial general liability coverage
Commercial general liability coverage helps protect your business from being sued for negligence. Though, you should know that it is not meant to cover theft or other kinds of property damages. Your coverage limit can be anywhere from $500,000 to $10 million, depending on the size and needs of your business. Talk with an agent at Farmers Insurance today to find out more about your options. Worried about getting sued? 6 General Liability Limits Every Business Owner should know About – Things every business owner should know about commercial general liability coverage.
Commercial general liability coverage helps protect your business from being sued for negligence. Though, you should know that it is not meant to cover theft or other kinds of property damages. Your coverage limit can be anywhere from $500,000 to $10 million, depending on the size and needs of your business. Talk with an agent at Farmers Insurance today to find out more about your options. Worried about getting sued?
When you should get more than the basic limit
A limit of $1 million per claim or incident is the most common amount. But if you want to know what’s right for your specific business, the right policy is one that meets the following criteria: it’s sufficient to cover your potential liabilities; it won’t be too expensive; and it will meet other financial obligations, such as debt obligations. That said, higher limits may be needed in certain industries like construction or manufacturing where there are greater potential liabilities related to more employees and operations. Higher limits might also be needed for businesses with significant assets that could get damaged by liability claims. The average limit is 2-3 times the annual gross income of a small business owner, but this can vary widely depending on the industry and type of work performed.