General Liability Insurance Explained

The purchase of an insurance policy is one important business decision that a contractor will make. For instance, possessing a contractor general liability insurance will protect the assets of the business if and when its owner or its employees are held accountable for causing property damage or personal injury in the course of its operations. A client, for instance, who trips, falls, and breaks a bone during a visit to an insured company’s business premises, is covered by this type of insurance.

Having general liability coverage is helpful particularly in our society that has grown to be quite litigious. This insurance can effectively protect a company from potential lawsuits. The costs of litigation can go to exorbitant proportions in legal cases that could go dragging on in the courts. Legal claims, even if fraudulent, can impact upon a business’ bottom line. Without the right insurance, a company can be entangled in an expensive and lengthy legal process just to contest spurious claims.

What general liability insurance provides a company is protection against claims for damages allegedly caused by its business operations, including those of its employees’ official actions. In a manner of speaking, this coverage works as a safety valve that can help prevent a company from closing down as a result of damage claims against it.

How Much Coverage Is Needed

The amount of coverage that company would need largely depends on the risks inherent to its business. The higher the chance that a certain damage could occur or the higher the risk for an expensive damage, the higher the level of coverage needed. For example, construction firms building high-rises and operating hazardous equipment will generally carry a higher risk of doing damage than a software development company. Nonetheless, both of these businesses need to have general liability coverage, though at varying levels.

Even businesses that are home-based need general liability insurance. Such coverage is necessary because potential claims can occur on home-based contractors visiting a client’s premises and vice versa. In this regard, the location of a business also a factor on the coverage level needed. In the U.S., the liability claims awarded in some states are higher than others. Businesses operating in these states would be well-advised to set a higher level of coverage.

But in the final analysis, the best general contractor liability insurance is one that a business never has to avail of. Companies that are in a position to achieve this are those that operate in an ethical and safe manner; this tack significantly minimizes the possibility of damage claims against them.

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