Commercial General Liability Insurance Policy- What to look for

[Stephen Kunen]

Hi all,

I have three investment properties, single families, in Indiana currently in the process of being transferred into 3 separate LLC's by quit claim deed. As a result I need to redo the homeowners insurance in the LLC's names. The insurance company I use also mentioned that once an owner (whether in your name or not, i.e. even if you control an entity) they require/recommend a commercial general liability insurance policy. The minimum price is $100 for coverage up to 500K, which sounds pretty good, and I would be willing to do that for each property if the policy is actually good.

So my question is, what should an out of state investor look for when evaluating commercial liability policies for their property? I have a general sense, but this will be the first time I purchase (maybe) a policy for this reason, so I hope to draw on your collective wisdom. The insurance agent mentioned that this covers the situation where the tenant invites a guest over who gets hurt, but there are tons of exclusions here. I'm generally biased against insurance, but know it plays an important role. Thanks!

Steve

[BreAnn Stephenson]

Hi Stephen!

Liability coverage is actually pretty simple in comparison to the property coverage on your locations.  It usually has the following categories:

1. General Aggregate (Total limit for the policy period)

2. Per Occurrence Limit (Limit per incident)

3. Products/Completed Operations (For completed work on the property - usually a contractors GL policy will have this limit to cover their workmanship so it may be excluded from some policies out there for an investor.)

4. Personal/Advertising Injury (For acts of false advertising/slander. That would be if you were harming someone else through your business methods, so can be excluded for properties.)

5. Damage to Premises Rented to You (Doesn't usually apply for investors as this has to do with space rented to you...like if you rented an offsite office and caused fire damage to it.)

6. Medical Payments (A "good faith" payment, not subject to deductible that the ins. co. could make in order to avoid a lawsuit...if you do not have this limit in your coverage, don't fret. Payments for medical expenses would be paid under the per occurrence and general aggregate limits.)

7. Deductible (Your out-of-pocket cost if you are liable for damages to another party's property or for bodily injury.)

Sample limits might be as follows:

1. $2 Million

2. $1 Million

3. Excluded

4. Excluded

5. $50,000 (or Excluded)

6. $2,000

7. $1,000 (or could be $2500 maybe)

Bottom line: You want premises liability coverage for your properties because though liability claims are more rare than property damage, they can be the type of claims that could take you out of business if someone is hurt. And...as you can see, the cost is pretty low.  You can usually get $1 Million per Occurrence/$2 Million Aggregate for $100/year per property or sometimes less if you have a company that is also providing the property coverage too...

One last side note: Premises liability typically will not cover:

-Any contractors working on a property (they should have their own coverage for their workmanship and/or workman's comp)

-Anyone else hired by you to do work on the property (i.e. don't hire your friend's kid to do work on the property as you are opening yourself up to risk)

Cheers, BreAnn