Whether you’re a contractor, fitness instructor, photographer, or consultant, you’re both a professional and a business owner. In order to focus on your work, you need to know that all the details of running a business are taken care of. That’s what makes business insurance so important. It is the safety net that lets you focus on doing the best work you can as you grow your company. Accidents happen to even the most skilled and experienced business owners, but with a good insurance policy, you can move past it and be ready for the next step. Keep reading to learn more about the details you should be looking for: coverage, aggregate limits, and more.
What Do I Need to Know About Insurance?
For most business owners, the most basic policy is general liability insurance. This is the insurance policy that protects you in cases of straightforward accidents ranging from a tool falling and damaging your customer’s property to a visitor getting hurt in your studio. Even with all the appropriate safety measures in place, these kinds of accidents can happen. Your policy will also cover you if you’ve accidentally crossed a line in your business management, like if someone claims you’ve committed copyright infringement or false advertising.
How Far Does It Get Me?
As you can see, general liability covers a pretty wide range of scenarios. However, it won’t cover you in cases of deliberate damage or negligence and there are quantitative limits as well. These usually fall into one of two categories:
This refers to the maximum amount that the insurance company has agreed to pay for any one claim. This protects them from exaggerated claims. For you, it means that in the vast majority of cases, your insurance policy will cover everything. However, if a particular claim is higher than the per-occurrence limit, you will have to pay the difference. These limits are set so that it’s unlikely the claim will be much higher than the limit and the policy will probably still cover most of it.
General Aggregate Limit
General aggregate in insurance is the total amount that you can claim from your insurance company within the period of the policy, which is usually one year. The aggregate helps the insurance company create an incentive for its policyholders to avoid lawsuits. Too many in one year, and you’ll run up against the aggregate limit of liability. Unlike the per-occurrence limits, you can tell when you’re approaching the aggregate insurance limit so there’s a big benefit to understanding it now.
How Is the Aggregate Limit Calculated?
So what does the general aggregate mean? Let’s say your policy has a general aggregate liability limit of $10,000. If you’ve been sued for $4,000 and $5,000 already this year and now you’re being sued for $2,000, your insurance company will only pay the first $1,000 of the final claim. Keep in mind that the aggregate insurance limit is on on money that the insurance company has actually paid out. So if you have a per-occurrence limit of $5,000 and were sued for $7,000, your insurance company probably paid out $5,000 and you paid the other $2,000 out of pocket. So when it comes time to calculate how close you are to the aggregate limit, only count $5,000 from that particular claim.
What Do I Need to Know When Choosing an Insurance Policy?
Understanding these limits is important when choosing a policy because you want to make sure that it will actually help you when you need it. An aggregate limit of $1,000 isn’t going to be enough if you work with very expensive materials and the average damage claim is for $1 million. On the other hand, policies with high limits are often more expensive so you don’t want to pay for a policy with a $1 million limit if claims in your field are never higher than a few thousand dollars.
The Solution: Industry-Tailored Insurance Policies
Different industries have different needs. In some professions, professional liability claims are just part of the cost of doing business, while in others they’re very rare. Similarly, different industries can expect claims on entirely different scales. For example, if you’re a photographer and your camera falls on someone’s foot, the claim will be much smaller than the potential claims of a mechanic who specializes in luxury cars. That’s why industry-specific policies are a great option for many business owners. Their coverage and limitations are created with specific demand in mind and you don’t end up paying for more than you need.