Some insurance policies like property insurance or liquor liability insurance are pretty self-explanatory. But other common coverage options can require a bit of an explanation.

General Liability Insurance and Umbrella Liability Insurance are two common types of coverage for franchises. These two liability policies are very similar, however there are a few key differentiators.

In short, General Liability is your starting point for coverage against third-party claims of damages. Umbrella Liability is an extension of General Liability and offers limits of insurance above your General Liability limits. Here’s how to tell them apart:

What to Know About General Liability Insurance

General Liability Insurance is your first line of defense against a third-party claim alleging damages. Coverage protects your business against a broad range of liability claims, such as bodily and personal injury, property damage and other claims.

General Liability claims can easily occur during your normal business operations:

• A customer, client or visitor could injure themselves in your business and make a claim for medical expenses.
• An employee of your business could have an accident damaging customer property resulting in a claim for repair costs.
• A third party could take your business to court, resulting in claims for legal costs, judgements or settlements.

While the specifics of claims will vary, every organization faces these and other risks. The purpose of General Liability is to protect your business from the unexpected.

General Liability Insurance policies have limits on the maximum amount the policy will pay in the event of a single claim. There are also policy aggregate limits which restrict the amount the policy will pay in each policy term (typically annual), regardless of the number of claims or occurrences.

These limits are designed to protect you from the most common claims for your industry. But there are always outlier cases where the damages sought in a claim exceed your General Liability coverage limits. This is where an Umbrella Liability Insurance policy comes into play.

What to Know About Umbrella Liability Insurance

An Umbrella Liability policy provides coverage beyond your General Liability policy. The two policies work together. Once you have exhausted the limits of your General Liability coverage, your Umbrella coverage can provide extra protection.

The risk of potential high-dollar claims is small but real. Without Umbrella coverage, your business and its financial assets could be placed at risk if you face a major lawsuit, even if you have General Liability coverage.

Adding Umbrella Liability Insurance is an affordable solution to the risk posed by big claims that result in high-dollar damages.

While you hope a claim is never filed against your franchise, these policies are important to have in place because claims do happen. Whether a customer trips over an extension cord and sprains their wrist or a tree limb falls on their car, your business has responsibility for incidents that occur on your property.

Ensure your franchise has the proper insurance coverage and limits in place to protect against the risks your business faces.