General Liability Insurance

general liability insurance

General Liability insurance is a must for any responsible business that manufactures, distributes, or imports products. defines general liability as the policy that protects business organizations against liability claims alleging bodily injury and property damage. Just about any product, from high risk to low risk, can cause some type of injury to a consumer that can result in a lawsuit. Failure of a business to carry General Liability insurance can result in personal liability for the owners if the corporate or LLC veil is pierced. The General Liability experts at Sadler Product Liability Insurance are specialists in finding the best coverage terms at the absolute lowest cost for product manufacturers, distributors, and importers.

Basic limits of coverage:

  • Each occurrence $1,000,000
  • Products/Completed Operations aggregate $2,000,000
  • General aggregate  $2,000,000
  • Personal & Advertising Injury $1,000,000
  • Damage to premises rented from others $300,000
  • Premises medical expense payments $5,000

Do I need a more than a $1 million each-occurrence limit?

No one can answer this question without a crystal ball to predict whether or not you will be sued and for how much. Here are some of the considerations when choosing a limit:

  • Risk nature of the product being sold. The higher the risk, the higher the limit that is needed.
  • How many products have you put or will you put in stream of distribution? The more products, the greater the chance of multiple lawsuits.
  • What is the severity potential for your product to cause a serious injury?
  • Contractual requirements to sell in stores such as Wal-Mart.
  • What do you have to lose in terms of assets that can be taken in a lawsuit?
  • Is your business a “cash machine” that you need to protect?
  • What can you afford?  Additional layers of $1,000,000 will start out at least $2,500 per million in many cases.

 How much will General Liability Insurance cost?

The rates are based on each $1,000 of sales revenues and vary widely depending on the riskiness of the product being sold. For example, children’s products will have a much higher rate per $1000 of sales than common hardware items such as tools. Rates for children’s products are often in the $15 to $25 per $1000 of sales; whereas basic tools can be in the $1 to $3 per $1000 of sales range.  In addition, minimum premiums are involved. The insurance carriers establish certain minimum premiums just to cover the expenses of writing a policy. They vary per product line. For example, children’s products and power tools minimum premiums typically start in the $7,500 per year range.  Less risky products such as class one medical products may have minimum premiums in the $3,000 range. Even less riskier products such as common household items may have minimum premiums less than $1,000 per year.

3 Reasons for choosing General Liability instead of stand alone Product Liability

Should you purchase General Liability (including products liability) or a stand alone Product Liability insurance policy? Based on our experience, it is always in your best interest to purchase General Liability insurance for the following reasons:

  1. Contracts rarely just ask for proof of Product Liability insurance. A typical contract will request General Liability with a Products and Completed Operations Aggregate limit. And while it is true that Product Liability insurance alone will likely provide the necessary protection, it can be difficult to convince the party requiring insurance that your policy will be sufficient.
  2. The premium cost to have General Liability versus Product Liability is often insignificant. Unless you are doing installation or work at a client’s location, insurance underwriters recognize there is very little General Liability exposure and base the premium almost entirely on the product liability exposure so there is almost no premium savings by purchasing just Product Liability insurance.
  3. You may have some minor exposures that require General Liability Insurance coverage such as slip and fall accidents at your business premises, trade show mishaps resulting in bodily injury or property damage, or product demo mishaps resulting in bodily injury.

Contents of a General Liability Policy

Each Occurrence – The amount payable for any one occurrence or accident. This is perhaps the most important limit under the policy.

Products/Completed Operations Aggregate – The cap on the amount that the carrier will pay for multiple product-related claims arising during the policy period.Protects against covered lawsuits alleging bodily injury or property damage caused by an occurrence arising out of the sale of a defective product (products liability) or out of a completed operation (ex: construction of a building). Products And Completed Operations Coverage can only be triggered after the final sale of a product or construction job.

General Aggregate – The cap on the amount that the carrier will pay for multiple premises and operations claims arising during the policy period.

Personal and Advertising Injury – The amount payable for certain lawsuits, such as slander, libel, false imprisonment, invasion of privacy, and disparagement of a competitor’s product in your advertising materials.

Damage To Premises Rented From Others – The amount payable when you negligently start a fire and damage premises that you rent under a lease agreement.

Premises Medical Expense Payments – The amount that the insurance carrier will voluntarily pay on your behalf to get rid of nuisance incidents, such as slips and falls on your premises. However, if the injured party files a lawsuit, the Each Occurrence limit would be available.

Premises And Operations– – Protects against covered lawsuits alleging bodily injury or property damage caused by an occurrence arising from the premises or operations of the insured.

Some of the older General Liability policy forms may include terms for component coverages such as “independent contractors,” “broad form property damage,” “and underground / collapse / explosion.” These component coverages are automatically built into the modern coverage forms.

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