How is Liability Cover Different from Medical Expense Cover?

Every company aims to earn profits. While profit and loss is a part of operating every business, it is essential for business owners to stay prepared for any legal liability that may come their way thanks to unforeseen incidents involving third parties. A Commercial General Liability insurance (CGL) policy is the best way to stay prepared for third party liabilities that you may incur as a company.

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For the unversed, commercial general liability insurance provides financial assistance to an insured business in case they incur legal liabilities for causing injuries or damages to third parties due to their regular business operations. It protects a company financially in case of product liability, public liability and third party accidents caused on their premises due to business operations.

Let’s understand it with the help of an example.

Suppose ABC Foods own a factory that manufactures instant noodles. The company is planning to launch a new variety of noodles and a food inspector arrives at the factory to approve the product. During the inspection, the food inspector trips on his feet and falls hard on his hand. The accident results in a sprained leg and a fractured arm. In this situation, the company will be able to pay compensation to the food inspector without incurring a financial loss with the help of a commercial general liability insurance policy.

Types of Commercial General Liability Insurance Coverage

Two types of commercial general liability insurance coverage are available for businesses. They are:

Liability Cover –

The Liability cover provides financial assistance to the insured business for incurring third party liabilities, provided they are legally mandated to pay compensation to the third parties.

Medical Expense Cover –

The Medical Expense cover provides financial assistance to the insured business for incurring third party liabilities irrespective of whether they are legally mandated to pay the compensation to the victim.

Difference Between Liability Cover and Medical Expense Cover

A lot of people often get confused between the liability cover and the medical expense cover available under the commercial general liability insurance policy. The following table highlights the stark differences between both types of coverage under commercial general liability insurance. Take a look:

Categories

Liability Cover

Medical Expense Cover

Meaning

It provides coverage for third party injuries, damages, death or disability resulting from regular business operations of the insured business in case the policyholder are legally obligated to compensate the affected third party.

It provides coverage for third party liabilities incurred by the insured business from their regular business operations regardless of any legal obligation of the policyholder to compensate the affected third party.

Legal Obligation

This cover applies only if the insured business is legally obligated to pay compensation to third parties.

This cover applies even if the insured business is not legally obligated to pay compensation to third parties.

Types of Claims Covered

It covers all kinds of third party claims, such as claims due to property damages, advertising infringement, physical injury, invasion of privacy, etc.

It covers third party claims that arise only out of accidental or physical injuries.

Coverage Amount

The liability cover is available with a higher coverage amount or sum insured as compared to medical expense cover.

The medical expense cover is available with a lower coverage amount as compared to the liability cover.

Claim Settlement

The claims are paid only after the insured business receives a legal notice to pay compensation to the third party.

The claims are paid as soon as the accident occurs at the business premises or due to the regular business operations without a legal complaint from the victim to pay compensation.

Sued by Injured Third Party

The claim amount will be paid under this cover if the injured third party sues the policyholder for negligence and demands compensation.

The claim amount will be paid under this cover if the injured third party does not sue the policyholder for negligence.

Proof of Negligence

The insured business needs to prove its negligence to raise a claim.

The insured business does not need to prove its negligence to file a claim.

Acknowledging Responsibility of the Injury

Under this cover, claims will be paid after the insured business acknowledges the responsibility for causing third party injuries or damages.

Under this cover, claims will be paid even if the insured business does not acknowledge responsibility for the injuries sustained by the third party.

In a Nutshell

Commercial general liability insurance is a saviour for all business, especially those involved in manufacturing, product development and software development for customers and clients. It prevents them from incurring major monetary losses in case an accident occurs due to their regular business operations. In case of any confusion between the two types of CGL insurance coverage, the above differences between the liability cover and the medical expense cover will surely help businesses to choose the right kind of coverage.

Written By: PolicyBazaar - Updated: 29 July 2021