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general liability insurance
General Liability Insurance

General Liability Insurance

general liability insurance coverage

 That’s why General liability coverage is an important component of your homeowners insurance or renters insurance policy. General liability insurance is the best protection money can buy. Let’s learn exactly what it is, how it works and how much you need.

Here’s a real life example: let’s say a guest visits your home and while walking through your garage is hit by a falling ladder. The guest suffers a broken arm and sues you for damages – which can be thousands of dollars. This is where General liability insurance can kick in. General liability will cover the costs of medical bills, as well as your legal defense fees, up to the limit of your liability coverage. However, General liability coverage may also be able to cover an incident that occurs outside your home or property.

What does General liability insurance cover?

commercial general liabilityUnder your basic homeowners insurance or renters insurance policy, personal liability coverage may protect you under the following circumstances, up to your policy limits:

  • Lawsuits you may face if an accident occurs
  • Bodily injury to an individual
  • Property damage that occurs as a result of your negligence

If the liability limits of your policy don’t meet your needs, you may want to consider additional coverage such as personal umbrella liability insurance, which provides an extra layer of personal liability protection. This will help to cover costs if there’s a serious auto accident or accident on your property that exceed the limits of your liability coverage.

Personal liability insurance covers four basic things: lawsuits, medical bills, property damage and pet bites.

Lawsuits

If a neighbor breaks their hip falling down your stairs, then sues you, the legal fees alone would quickly start sapping your savings. This is where liability kicks in. It covers accidents that happen on your property so you’re not responsible for paying lawyers to defend you in court. It also covers any court awards if you lose. However, your insurance company will only pay out up to certain limits (more on that in a bit).

Medical Bills

Liability covers what’s called no-fault medical coverage. This means that if someone is injured at your house, they can send their medical bills to your insurance company. This coverage—also called medical payments coverage—usually starts at $1,000 per person.

Property Damage

If your son is playing at a neighbor’s house and accidentally wrecks their expensive furniture, you’re covered.

Pet Bites

Liability also covers you in the event your pets cause damage or bite someone. And the incident can happen on or off your property, which is helpful when Fluffy jumps the fence and starts running around the neighborhood. But just like all dogs don’t go to heaven, all dogs are not covered under home insurance. If you have a breed that’s been flagged as high-risk, your dog won’t be covered.

What isn’t covered by General liability insurance?

So far we’ve seen General liability insurance is pretty awesome. It protects you from a ton of bad things. But there’s another side to the coin.

General liability insurance won’t cover the following things:

Car Accidents

If you’re found liable for an accident involving vehicles, your home insurance liability won’t help. That’s what auto insurance is for.

Intentional Damage

If you or a family member purposely cause damage to someone or someone else’s property, don’t expect your insurance company to cover that.

Injuries to You or Your Family

Liability doesn’t cover incidents that happen to you or your family. That’s what your health insurance is for.

Business Claims

Your homeowner’s insurance liability protection won’t cover any business-related accidents or property damage. Your business insurance should do that.

There are also other things your standard home insurance policy won’t cover that many aren’t aware of. For instance, your insurance company won’t pay to repair flood damage.

How Much Liability Coverage Do You Need?

general liability insurance

Just like trying to figure out how much overall home insurance you need, you might be wondering how much liability coverage you should buy.  

General liability coverage may protect you under the following circumstances, up to your policy limits:

  • Lawsuits you may face if an accident occurs
  • Bodily injury to an individual
  • Property damage that occurs as a result of your negligence

If the liability limits of your policy don’t meet your needs, you may want to consider additional coverage such as General umbrella liability insurance, which provides an extra layer of General liability protection. This will help to cover costs if there’s a serious auto accident or accident on your property that exceed the limits of your liability coverage.

If you already have a homeowners insurance policy in place, but aren’t sure how much liability you have, check your insurance declaration page. You can find it on your insurance company’s website or app, and it will tell you exactly how much you have.

One last tip: If you have a larger net worth, meaning you have more assets at stake, and more of a likelihood of getting sued, look into umbrella insurance. An umbrella policy kicks in when you reach your policy’s liability limit. 

How much does General liability insurance cost?

general liability insurance for small business

General liability coverage typically costs around $8 to $10 a year for every $100,000 in coverage, If you max out your liability coverage at $500,000, it’ll only cost you around $50 a year, or a little over $4 a month.

Coverage may be a little more expensive depending on where you live. Liability protection in metro areas, for example, costs around $15 a year for every $100,000 in coverage. 

How much General liability insurance do I need?

Your General liability insurance coverage limit should be equal to the total value of your assets, or the combined value of everything you own. If you own two properties with a combined value of $400,000, for example, that’s $400,000 in real estate assets alone that you should protect with liability coverage. 

it’s wise to max out your liability coverage limits. Many homeowners may not be aware of this, but despite its importance in terms of financial protection, your General liability is one of the cheapest coverages on your policy. “For this reason, it’s always recommend at least $500,000 (in coverage) as it represents great value in protection compared to what it costs.

What is the difference between umbrella insurance and General Liability insurance?

 

Two terms that are commonly mixed up are General liability insurance vs. an umbrella policy

A General umbrella policy, or umbrella insurance, is a type of liability coverage that you can purchase in addition to your home insurance. If the liability coverage in your homeowners insurance is maxed out during a claim, your General umbrella policy kicks in to cover the remaining costs. Once you’ve reached your General liability limits, an umbrella policy, also known as excess liability insurance, would kick in and cover the additional amount of damages not covered by your homeowner’s policy. If you don’t have an umbrella policy and you’re assessed damages that are higher than your liability limits, you could be responsible for paying for those costs out of pocket. Think of umbrella coverage as an extra layer or extension of liability protection.

General umbrella policies are generally offered in increments of $1 million, with a maximum limit of $5 million. Policies typically cost around $300 a year for the minimum amount of coverage. If you have over half a million dollars in combined assets, General umbrella coverage may be well worth it.

Why to purchase General liability insurance?

Ask yourself “What do I have to lose?”
To answer this question you may have to calculate your net worth. You can do this in a way that’s easy just to get a general idea of what your General property is worth. Put a value on everything you own. Then, subtract the amounts you owe on those things. What’s left over is your net worth.
If your net worth exceeds the limits of liability claims on your primary insurance policies (auto insurance and home insurance) the amount you own above those limits could be at risk if the coverage limits are reached because of a liability claim. Then, you could be held legally responsible for the remainder of the worth of the claim. This could put your General property at risk. Ask CompareAquote to generate your net worth and then assess how much General liability insurance you need.

best general liability insurance for small business

Conclusion

Does everyone need General liability coverage? While it generally isn’t a bad idea to make sure that you are protected by having higher coverage limits to fill potential gaps caused by your car insurance, homeowners insurance, or renters insurance policies so that you are less likely to be held legally responsible for the General injury or property damage of another person, there is one key consideration: your General property that you want to protect from liability claims.

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