If you’re a small business owner looking to protect your business from paying the price of day-to-day operational risks, you’re likely in the market for liability insurance coverage. But shopping around for insurance coverage can quickly become overwhelming, especially if you’re new to the world of business and insurance and don’t know the terminology. Before diving too deep into your search for coverage, refresh yourself on the following essential terms.
Commercial General Liability Insurance
Commercial general liability (CGL) insurance covers client and customer bodily injury or property damage caused by your business as well as reputational harm and other advertising injuries that your company causes to another business or individual.
Insurance providers consider CGL a comprehensive form of business insurance, but that doesn’t mean it protects your business from all risks and liabilities. Should a third party sue your business for bodily injury, property damage, or advertisement injury, your CGL policy can help pay for:
- Medical expenses
- Legal settlements
- Attorney and witness fees
- Evidence gathering charges
The Insurance Services Office (ISO) defines a bodily injury as a “bodily injury, disease, or sickness sustained by a person, including death resulting from any of these at any time.” It’s important to note that some insurance companies cover mental distress as a part of bodily injury coverage, while others only recognize physical harm on their CGL policies.
An advertising injury is an injury inflicted by your business during an advertisement campaign. This “injury” can be imposed on another individual, group, or company. Typically, general liability insurance covers the following:
- Libel, slander, or product disparagement
- Violation of the right to privacy
- Infringement of copyright
While your CGL policy helps pay legal expenses related to advertisement injury claims made against your business, it likely won’t include coverage for false advertisement claims.
Under a general liability insurance policy, coverage for medical payments can include any “reasonable” expense incurred from a bodily injury. For example, ambulance services, x-rays, surgery, and even funeral expenses are typically covered by CGL.
Commercial Property Liability Insurance
This policy protects any commercial property from damages due to fire, theft, or natural disasters. It is usually bought together with general liability insurance. It is especially useful for businesses located in an area prone to natural disasters or a city with a high crime rate. Property liability insurance, however, does not cover damages inflicted by tenants using the property.
Professional Liability Insurance/Errors and Omissions Insurance
Professional liability insurance, also known as errors and omissions insurance, covers claims of negligence, misrepresentation, or malpractice made against your professional practice. It can be quite beneficial for medical workers, lawyers, accountants, physicians, or anyone else who gives professional advice. However, you should note that the policy does not cover criminal prosecutions.
Negligence is the failure to act in a way that any other reasonable person or company would under the same set of circumstances. It may be intentional or unintentional and can be an act of omission or commission, or both. For example, computing errors leading to a company’s financial losses can be an act of accounting negligence.
Malpractice is an act of professional neglect, incompetence, or dereliction. For example, if a physician discloses a patient’s private information without their prior permission or authorization, it can be considered a medical malpractice case.
Business Owner’s Policy
A business owner’s policy bundles business property and business liability insurance in one plan. BOPs typically include coverage for claims that result from fire, theft, covered natural disasters, bodily injury, property damage, and advertising injury.
Policy Endorsements or Binders
An endorsement or a rider is a document attached to an insurance contract allowing for the modification, addition, or removal of stipulations in the original policy coverage.
Knowledge and the Power to Protect Your Business
Insurance is a complex business, and shopping for insurance policies usually requires substantial research. It’s essential that you familiarize yourself with insurance industry jargon before you begin comparing plans and providers. Your knowledge and understanding of these terminologies may go a long way to help you choose the right policy for your business.