In the world of insurance, the terms "general liability" and "commercial property" come around frequently. But, do you really know what they mean and more importantly, how they differ? Well, matters related to these two policies can be confusing at times, but it's crucial to have a clear understanding of their differences. This will help you to ensure that your business is fully covered in case of unexpected incidents.
What is commercial general liability insurance?
General liability insurance coverages provide basic protection to the insured and are frequently coupled with various liability insurance coverages. General liability insurance covers third-party claims, such as bodily injury or property damage, and protects business owners from related legal liabilities. In the event of a third-party lawsuit, your business will be protected from the legal and settlement costs resulting from the lawsuit. These policies also cover claims of copyright infringement and defamation up to the policy limits. This type of insurance covers both public liability and product liability in order to provide complete protection against third-party liabilities.
The following are some examples of situations where your company could be held liable for medical and legal expenses as well as compensatory and punitive damages:
1. If a product sold by a business causes injury or damage to a third party, the injured party may file a claim for compensation.
2. A home renovation company is working on a home and its operations cause damage to a neighboring property. The neighbor files a lawsuit against the company, claiming compensation for the loss or damage.
3. If a business provides professional services, such as accounting or legal services, and makes an error or omission that causes financial harm to a third party, the affected party may file a claim for compensation.
What are the typical exclusions in a general liability insurance policy?
- Liability of business already covered by other policies ( such as Claims against your Directors & Officers)
- Liabilities arising out of the conduct of the Insured’s business
- Loss or damage originating from war or war-like situations
- Business liability under workmen's compensation
- Damage to the work of the insured
- Professional or contractual liability
- Damage to the insured’s product
- Data theft, along with other cybercrimes
- Damage to the insured’s property
- Electronic data Recall of products, works, or impaired property and product guarantees
- A deficiency, inadequacy, defect, or dangerous condition in the product
- Errors and Omissions.
What is commercial property insurance?
If you are running any type of business, you would agree that the location from which it is run is one of the most important aspects for you. This is where you keep all of your equipment, assets, computers, and other systems. A business's premises or property is critical to its existence, growth, and survival. Any disruption to the premise will have a negative impact on the daily operations of the business and can lead to significant financial losses. All of this will affect the customer relationship and, in the long run, the business's reputation negatively.
This is the reason why a company must protect itself against possible losses it may incur in the course of doing business. A commercial property insurance policy is designed specifically to cover a loss or damage that may happen to a commercial or business property. This insurance policy covers any loss or damage to commercial property that may originate from natural disasters such as volcanoes, tsunamis, earthquakes, fire, theft, and so on. Retailers, manufacturing units, and businesses that provide services to customers often obtain commercial property insurance.
What are the typical exclusions in a commercial property insurance policy?
The following are not covered in a standard property insurance policy in India:
● Any damage or loss due to war or warlike situations
● Loss/damage to items older than 10 years
● Loss/damage of collectible items
● Any consequential loss is not covered
● Loss to the landlord is not covered if the property is given on rent
● Depreciation and wear and tear of the property
● Land cost
● Building under construction
Please note that for some of the above, an add-on coverage can be opted for and for the same the insurance provider can agree to cover at an added cost.
Now that you have got a fair idea about general liability insurance and commercial property insurance, we will now have a look at their differences.
How is commercial property insurance different from general liability insurance?
In a commercial property policy, you will be covered if your assets are damaged by things like fire, theft, or vandalism. It is your protection in case something happens to your assets. It will not cover damages to third-party assets.
On the other hand, your general liability insurance covers medical payments for injuries incurred on your property, as well as property damage that occurs to the property of someone else during your business there. Unlike commercial property policy, it does not cover loss or damage occurring to your business assets.
In short, commercial property insurance can help protect the assets owned by your company. Liability insurance can help cover costs if you are at fault for an injury to someone you interact with (other than employees) or damage to property your company does not own.
Is it necessary to have both general liability and commercial property insurance?
It is a necessity for anyone who owns a business that is open to the public to have general liability insurance. But general liability coverage does not cover your property. If you don't have the right kind of commercial property insurance, you could lose your livelihood if your property is damaged or stolen.
Your business must have general liability insurance and commercial property insurance. Although you may need other coverages in addition to general liability and commercial property insurance, these two are the basics you must have. As a small business owner, you may obtain a lower insurance rate if you purchase a commercial property insurance policy together with general liability insurance coverage. This insurance bundle is called a business owner's policy (BOP) and offers a chance to save money on both policies.
No matter what coverage you choose, be aware of your coverage limits. Every insurance policy has limitations. Those limits determine how much your policy will pay out on a claim. To fill the gaps left by your policy's limits, you might want to purchase another policy.
The combination of commercial property insurance and liability insurance can help protect your business against unforeseen events. If you encounter difficulty in interpreting technical terminology, seek assistance from an experienced insurance agent or broker who can provide explanations for obscure terms. Bimakavach helps you avail the right policy coverage for your business. Here, you can get the best recommendation for any insurance product in just 5 minutes.
Frequently Asked Questions ( FAQs)
- Are General Liability Insurance and Commercial Property Insurance policies always separate?
Commercial property and general liability insurance policies are commonly used in combination with what is defined as a business owner's policy, or BOP insurance. This coverage combines the benefits of property insurance with general liability insurance protections for injuries to people who are not your employees and damages to property that do not belong to you.
2. Can I get commercial property coverage without having liability coverage?
Yes. If you prefer, you can only purchase a commercial property policy. However, do keep in mind that most businesses should have liability insurance to protect them from possible financial losses.
3. What is liability?
To explain liability simply, it is something that an individual or a company owes to someone else. Liabilities are satisfied over time by transferring financial benefits such as money, products, or services. Liabilities are recorded on the balance sheet's right side. Accounts payable, loans, warranties, mortgages, bonds, deferred revenues, and accumulated expenses are some examples. Liability, in general, refers to the state of being accountable for anything, and it can refer to any amount or service owed to another entity. A homeowner's tax liability, for example, could be related to property taxes owed to the government or income tax authorities. Another example of liability is the potential damages in a lawsuit.
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