How to Choose the Best General Liability Policy for Your Business
General Liability insurance protects business assets by transferring risk from your organization to an insurance underwriter who will pay for obligations incurred if someone gets hurt on your property, by your product or when anyone employed by your business causes property damage or injury. General Liability insurance also covers legal defense costs and any settlement or award if your business is successfully sued and the claim is valid.
To choose the best general liability insurance for your business, follow these five steps to secure the right coverage at a reasonable cost while minimizing your business risks.
Step 1: Choose a Trusted Insurance Broker
As your broker will be responsible for bringing your risk to market, he or she must enjoy solid relationships with multiple stable underwriters. A broker who has earned your trust will put you and your business first by helping you to find policies matching your real business needs, while developing the most comprehensive and competitive insurance program available. This broker will develop a strategy and market your business to insurance carriers based upon a high level of detail and knowledge, thus enabling qualified carriers to provide broad coverage and prices at a competitive price.
Step 2: Analyze Your Business Risks
Insurance underwriters determine the level of risk they will accept when issuing your policy, after reviewing your application and determining whether it will provide all or a portion of the coverage being requested. As a result, it is critical your broker understands all your business risks.
Each insurance policy includes a premium and a deductible. A premium is the price you pay for your insurance coverage. Premiums vary among insurance companies, and depend on a number of risk factors. These factors include business location, building type, local fire protection services and the amount of insurance you purchase. A deductible is the amount of money the insured agrees to pay when filing a claim. Generally, the higher deductible the insured agrees to pay, the lower the premium will be. However, by agreeing to assume a higher deductible the insured assumes increased financial risk.
Step 3: Read The Entire Insurance Policy
It is surprising how often the insured and/or the trusted broker skip this important step. It is only by reading through the entire policy you and your broker can fully understand the extent of your coverages.
Going back to Step #1, choose a trusted broker who puts your business first. Because some insurance brokers build business based on volume transactions, they will save time by not reading every policy they sell in detail. This is a perilous course of action, as each insurance policy is a contract between the insured and the underwriter outlining the limits of coverage. It is important to know these limits before an event occurs, and coverage limits are locked in.
Step 4: What Is A Business Owner’s Policy?
Insurance can be purchased on an a la carte basis or in a package called a business owner’s policy (“BOP”). While purchasing separate policies from different insurers may result in higher total premiums, a BOP combines typical coverage options into a standard package. The BOP may be offered at a premium less than if each type of coverage was purchased separately.
Typically, BOPs include property, general liability, vehicular, business interruption and other types of coverage common to most businesses. BOPs can both simplify the insurance buying process and cost less. However, take note of the extent of coverage in any BOP because not every type of insurance is included. Professional liability, auto insurance, worker’s compensation and health and disability insurance belong to this group. If your business has unique risks, you may require additional coverage.
Step 5: Review Your Insurance Coverage Annually
As your business expands and potentially changes with the addition of new products and services, so can your liabilities. Your coverage should expand and change along with these liabilities, or else you could be under-insured in the event of a claim. Contact your trusted broker to discuss changes in your business and how they affect your coverage anytime you purchase, upgrade or replace equipment, alter your product mix, add or change suppliers, expand operations or add practices.
Greg Gerber is an account manager at KMRD Partners Inc., a risk and human capital management consulting and insurance brokerage firm headquartered in Bucks County. Greg can be reached at ggerber@kmrdpartners.com.
