General Liability Insurance
General liability insurance can be purchased separately or as part of a business-owner's policy (BOP). A BOP bundles property and liability insurance into one policy; however, the liability coverage limits are generally pretty low. Businesses that need more coverage usually purchase liability insurance as a separate policy.
The amount of coverage a business needs depends on a couple factors:
Perceived risk. Business owners should first consider the amount of risk associated with their business. For example, a business that manufactures heavy machinery is at a greater risk of being sued than a company that manufactures linens and would therefore need more liability insurance.
The state in which you operate. Businesses that operate in states with a history of awarding high damage amounts to plaintiffs typically need to carry liability insurance with higher coverage limits. An insurance broker can offer guidance in this area.
How General Liability Works:
Under a general liability insurance policy, the insurer is obligated to pay the legal costs of a business in a covered liability claim or lawsuit. Covered liability claims include bodily injury, property damage, personal injury and advertising injury (damage from slander or false advertising). The insurance company also covers compensatory and general damages. Punitive damages aren't covered under general liability insurance policies because they are considered punishment for intentional acts.