The word liability has a number of meanings and definitions, for insurance purposes the following is the most accepted definition: A legal obligation or responsibility to a third party for damages or injury.
“But It is Not My Fault!”
Anyone who has raised teenagers has heard excuses such as “It’s not my fault.” And “I didn’t do it.” daily. And granted sometimes that is true but we still must help them see that while they may not have directly committed the offense, they still may have liability because of specific actions or inactions.
How does this pertain to general and product liability insurance? With legal liability, the fault is not necessarily a factor in determining responsibility. With a better understanding of liability, we can now review the difference between general and product liability insurance.
Product Liability Insurance vs. General Liability Insurance
Product liability insurance can either be included as part of a general liability insurance policy or the two coverages can be written separately. Samples of the different policy coverage and limits are shown below.
General Liability Insurance
A general liability policy without product liability insurance will include the following standard limits:
General Liability Aggregate Limit: $2,000,000
General Liability Per Occurrence Limit: $1,000,000
Typically includes these additional coverages:
Personal and Advertising Injury Limit: $1,000,000
Damage to Premises Rented to You Limit: $300,000
Medical Expense Limit: $5,000
Product Liability Insurance
A product liability insurance policy without general liability insurance will include the following standard limits:
Products Aggregate Limit: $2,000,000
Products Liability Per Occurrence Limit: $1,000,000
General & Product Liability Insurance
A combined policy will include general liability insurance and product liability insurance in the same policy along with the additional coverages that are common in a general liability policy with standard limits.
General Liability Aggregate Limit: $2,000,000
Products & Completed Operations Aggregate Limit: $2,000,000
Per Occurrence Limit: $1,000,000
Personal and Advertising Injury Limit: $1,000,000
Damage to Premises Rented to You Limit: $300,000
Medical Expense Limit: $5,000
Definition Of Terms
Insurance often includes uncommon terms. Here is an explanation of the terms and what is included in the coverage.
Aggregate: The total amount your policy will pay for all coverage during the policy term.
Per Occurrence: The total amount your policy will pay for any one claim occurrence.
General Liability Insurance: Sometimes referred to as public liability insurance, general liability covers you for claims from a third party for injury or property damage occurring on your premise.
Products Liability Insurance: This coverage is for injury or property damage to others because of your product. This can be included with your general liability insurance or purchased as a separate policy.
Products & Completed Operations Liability: This coverage is often included in most general liability insurance policies. This includes coverage for your products and also for your completed business services.
Personal & Advertising Injury: A coverage included with general liability insurance for offenses against another’s intellectual property or the advertising of your products and services.
Damage to Premises Rented to You: Coverage for premises you lease or rent when a fire loss occurs that you are liable for causing.
Medical Expense Limit: Medical expenses are paid without regard to fault as a show of goodwill and to minimize further action by a third party that is injured due to your business operations, products, or on your premise.
Product Liability VS. General Liability
General liability and product liability insurance are both intended to cover bodily injury and property damage to a third party, this does not include yourself, your executives, members of the LLC, stockholders, employees, or a spouse.
Product liability insurance can be—and often is—included as coverage under your general liability insurance policy or as a separate stand-alone policy. There are benefits and drawbacks to each.
Some benefits of having these two coverages in one policy consist of:
- More Coverage—Other areas of your business operations; premises liability, completed operations, personal and advertising injury, and damage to rented premises, are included along with, product liability coverage.
- Seamless Claims—With claims there may be a blurred line between whether it was caused by the product or your other business operations, or a claim may involve multiple coverages. When the coverage is combined the claim can be settled more quickly.
- Affordability—When the coverage is combined you may see savings over the cost of two individual policies.
Some drawbacks of having general and product liability insurance in one policy may involve:
- Aggregate Limit—You may erode your aggregate limits more quickly than when you have separate policies.
- Specialized Coverage—A standalone product liability policy may give you more specialized coverage options than a standard combined policy. For instance, you may be able to add product recall, spoilage, or worldwide territory coverage to a product’s policy.
- Exclusions and Restrictions—When you purchase a combined policy that coverage can contain more exclusions or product restrictions than a policy specifically tailored to your product.
In the end, each business is unique and should speak with a product liability insurance specialist to help you determine what the best options are to protect your business.
Insurance Canopy has the knowledge and expertise to help you find the right policy. You can buy a policy now or if you have additional questions please reach out to us at 844.520.6993 and one of our representatives will be happy to assist you.
