Insurance has limits. You pay for a certain amount of protection and if an incident occurs, your insurance company will cover you up to those limits.
When interpreting the limits that you have on your general liability insurance, it may look a little something like this: 100/200/100. This means that you have bodily injury coverage of $100,000 per person, $200,000 for all involved, and $100,000 for property damage that was your fault in an accident.
There are steps that you can take to establish your limits, whether you're going to an insurer's office or buying general liability online. It can be rather hard for a business to make this determination because you never know how expensive medical costs or property damage is going to be in an accident. The end result depends upon the accident itself.
But what you can do is evaluate every potential accident. For instance, slip and fall accidents, automobile accidents, accidents involving heavy machinery, and various other hazards. Unfortunately, many are unforeseen.
But what you can do is look into what has been awarded to injured individuals by judges in the past or what settlement amounts have amounted up to for slip and fall accidents, auto accidents, and such. This can give you an idea of what kind of limits you need to establish.
You also need to look at your budget, but consider the cost of having to pay out of your pocket for an accident that you did not intend to happen. You will find that the premium you pay will never exceed the amount that is paid out in a settlement, thus you save a lot of money.
If an accident does occur within your business, the insurance company is going to try and settle. You want to be able to reach a settlement because going before a judge and jury could mean the jury could award a high amount of money and that amount could exceed your limits. Any time that an awarded amount exceeds limits, the rest comes out of the defendant's pocket. You don't want this to happen to you because it could lead to the scaling down or demise of your business. This could then result in you appealing and appealing until you can't appeal any more. This can cause you and the plaintiff to be in court for years rather than reach an agreement and go on with your lives.
But when a claim has been made against your business, your insurance company kicks into gear and works on the settlement. The idea is for that settlement to be within your limits so that you do not have to pay anything out of pocket. If the proposed amount would exceed your policy limits, you will be asked if you agree to the settlement. You don't have to, but then the case may go to court.
If the settlement is agreed upon, the insurance company will cut a check to the individual through their insurance company for the settlement amount. They can then apply the money toward their medical expenses or reimburse themselves for what they have already spent.
It is very important that you put some thought into your limits so that you know you have enough to protect you in case the unexpected happens. Although you may do everything that you can to avoid an accident from happening, you may find that it is literally impossible to prevent everything. No one expects for an accident to happen, otherwise the world would be a much different place. But when something occurs that you did not mean to happen, you shouldn't have to pay more for it than your insurance premium.