What is Comprehensive General Liability Insurance?

What is a Comprehensive General Liability Insurance Policy?

Comprehensive general liability insurance is also known as commercial general liability (CGL) insurance. It protects organisations and enterprises from legal liabilities arising from third-party bodily injuries or property damages caused by their products, services or premises. CGL insurance has features of both product and public liability insurance.

Product liability insurance includes damages caused by a company’s products or services, such as property damage or bodily harm by consumption or use. Public liability insurance, on the other hand, offers security against public claims and legal cases against a company. It usually includes court settlements and compensation fees. In addition, accidents on the premises and operation mismanagement are also covered.

A Few Examples of Comprehensive General Liability Insurance

Here are a few examples where comprehensive general liability insurance can come to a company’s aid:

• You own a construction service agency. During the servicing, poor maintenance of the electric switchboard leads to a fire. This causes heavy damage to the customer and the property. You may need to pay for the reconstruction and medical costs, along with a negligence fine if the customer files a suit.
• You own a company that sells chocolates. Due to contamination in the product, consumers face health issues. In such a scenario, your company may be held liable for the health damages if the consumers file a suit. As a result, you may have to pay the medical bills for the treatment of the affected people.
• You run a steel business, and one of your customers stumbles and falls on your premises. He suffers from a leg injury. The customer may hold you liable for the incident and ask for compensation.
  
  

In all the above situations, your company may end up paying hefty compensation amounts to customers. However, comprehensive general liability insurance can secure you against such unexpected liabilities.

Types of Businesses that Need Comprehensive General Liability Insurance

Every business operating in the market is prone to various risks. However, businesses like pharmaceutics, food and beverage industries, or beauty product companies face higher risks of accidental damage. Service-based businesses like construction, healthcare, or transportation companies may also face a higher risk of damages and claims.

Buying a comprehensive general liability policy can be wise if you run the following type of business:

• Your business involves a lot of interaction with clients, customers, or vendors like a restaurant, hotel, retail shop, etc.
• Your business involves a lot of visits to external sites like a catering business, construction business, etc.
• Your business represents a client. For example, you run an advertising business, PR agency, or financial or legal advisory firm
• Your business manufactures products like medicines, food and beverage items, etc.
• Your business provides professional services like graphic designing, marketing, etc.

What are the Benefits of Comprehensive General Liability Insurance?

Here is a list of benefits that come along with CGL insurance:

• Commercial liability insurance covers costs incurred in defending claims like lawyer and consultant's fees.
• You can tailor CGL policy according to your business’s unique requirements or a specific contractual requirement.
• A single general liability insurance can cover multiple business premises or factories across the country or world.

What is Covered Under Comprehensive General Liability Insurance?

While the coverage offered under a comprehensive general liability policy can vary from one insurance company to another, here’s what the policy usually covers:

• Injury by a product: General liability insurance provides financial coverage if your company products are held responsible for third-party bodily harm.
  
  
• Injury on-premises: CGL insurance offers coverage if a customer or client gets injured on your company premises.
  
  
• Property damage: The insurance policy covers third-party property damages caused by your company’s products or services.
  
  
• Personal injury: General liability insurance covers personal injuries suffered by a third party, like defamation and wrongful entry.
  
  
• Completed operation: Some CGL policies extend coverage after project completion. For example, if a construction company is held liable for damages or problems after completing the construction, the policy covers the related costs.
  
  
• Advertising injuries: The policy offers coverage if your company is held liable for customer losses resulting from miscommunication like copyright issues, incorrect warnings, unclear usage guides, etc.
  
  
• Medical expenses: The insurance policy covers medical expenses involved in the treatment of a third party physically injured by your business.

What is Not Covered Under Comprehensive General Liability Insurance?

Commercial general liability insurance does not cover the following:

• Deliberate non-compliance: The policy does not cover losses arising from willful, intentional, or deliberate non-compliance with statutory regulations.
  
  
• Product guarantee claims: CGL insurance does not offer respite in case of claims resulting from product guarantee.
  
  
• Product recall: General liability insurance does not offer coverage for losses related to product recalls due to safety concerns, defects, etc.
  
  
• Pure financial loss: The policy does not cover pure financial losses like loss in market share.
  
  
• Employee injuries: General liability insurance does not cover damages or injuries caused to your employees while working. The policy covers third parties like customers, suppliers or vendors.
  
  
• Expected/ intended injury: The policy does not cover damages or injuries that are intended or expected to occur.
  
  
• Damage to own product: Damages to own products are not covered under the general liability insurance.
  
  
• Intentional harm: CGL insurance does not cover any intentional acts of fraud, cheating, injury, or lying. Such liabilities fall on your company alone. The policy covers only unintentional harm caused to customers.
  
  
• Reconditioning or repair expenses: The policy excludes costs involved in repairing or reconditioning products.
  
  
• Environmental liabilities: CGL insurance does not cover any damage or harm caused to the environment by your company’s hazardous measures or unregulated practices.
  
  
• Contractual liabilities: The policy does not cover any liability assumed and agreed by you through a contract. For example, you signed a contract and agreed to take responsibility for damages. Such contractual liability will not be covered by the policy.
  
  
• Internal issues claim: General liability insurance does not cover any discrimination, misunderstandings, terminations, or harassment claims in your company.
  
  
• War or war-like situations: The policy does not cover injuries or property damage caused by war or war-like situations.
  
  

Note: Exclusions under the CGL insurance can vary from one insurance company to another. It is better to ask your insurance provider or go through the policy documents to learn about them in detail.

What is the Cost of Comprehensive General Liability Insurance?

The cost of general liability insurance may vary between insurers. However, it usually depends on several factors, including:
 

• Nature of business: The major factor deciding the cost of your policy is the nature of your business operations. Each business has a different level of associated risks. For example, running a factory involves higher risks when compared to running a bookshop.
  
  
• Size of business: The larger your business, the more risks it is prone to. Hence the premium is usually higher if your business is large in size.
  
  
• Type of products or services: The cost of your CGL policy also depends on the type of products or services you deal in. For example, running a food and beverage or pharmaceutical business involves higher risks of claims.
  
  
• Claim history: The number of claims made by you in the past also plays a role in deciding your insurance premium.
  
  
• The number of locations: If your business operates in multiple locations, it becomes more prone to risks. This increases your insurance cost.
  
  
• Estimated turnover:  Your business’s estimated turnover also decides the cost of your insurance premium.

How To Pick the Right Comprehensive General Liability Insurance Policy?

Here’s how you can pick the right CGL policy for business:

• Consider the level of potential risks associated with your business.
• Make sure the policy provides maximum coverage for your business activities, be it advertising injuries, third-party injuries, property damages, or completed operations.
• Pick an insurance company that offers a seamless claim settlement process.
• While saving money is a priority for every business, buying a cheap CGL policy may not be wise. It is important to compare different policies, their coverage, and premiums to make the most affordable and suitable choice.
• Always check the various policy inclusions and exclusions by going through the policy terms and conditions carefully.

Wrapping Up

Accidents can happen anytime and anywhere. However, losses or damages caused to third parties due to your product, service or on your premises become your liability. Comprehensive general liability insurance covers an array of liability loss exposures your business faces. The policy covers liabilities a public liability insurance does and also provides protection against claims for product, personal, and advertising injuries.

Most businesses, especially small to medium enterprises, should protect themselves from any future financial losses with a suitable insurance plan. You can avail of a reasonable SME insurance plan for your business to secure it from unexpected losses.