As a small business owner, you probably have wondered whether you need to have General Liability insurance.
General liability insurance typically is not required by law, as Worker’s Compensation and Automobile Liability insurance are, so the decision whether to buy this insurance will be based on what your company does, your contractual obligations, and your risk tolerance.
What Does General Liability Insurance Cover?
General liability insurance may cover some other types of claims, but it typically can cover three main categories of claims:
- Bodily injury to third parties
- Property damage to third parties
- Advertising injury
What Doesn’t General Liability Insurance Cover?
There are certain types of claims that sometimes people mistakenly believe General Liability insurance covers, but it does not. Those claims include:
- Damage to your own property (this is covered by Property insurance)
- Injury to your own employees (this is covered by Worker’s Compensation insurance)
- Auto accidents caused by your employees driving for work (this is covered by Commercial Automobile Liability insurance)
Some Examples of Claims That May Be Covered By General Liability Insurance
- A person slips, falls and is injured, or claims to be injured at your business premises
- Someone buys your product and is injured by it
- Your employees damage someone else’s property while doing work for them
- Your business infringes someone’s copyright in an advertisement
- One of your advertisements supposedly causes reputational harm to a competitor’s business
Other Reasons You May Need General Liability Insurance
The most common other reason for needing Commercial General Liability insurance, beyond helping to provide coverage for the types of claims mentioned above, is that you may be contractually required to do so.
It is often the case that third parties with which you contract will require you to have General Liability insurance. These third parties may include your landlord, customers and anyone else where there’s a risk that your business could cause bodily injury or property damage that could affect them.
Those third parties will require you to agree contractually to have this insurance coverage and to provide a certificate of insurance that proves the coverage is in place, with an insurance company and limits satisfactory to them. They will typically accept insurance companies that have an AM Best rating of A- or better and they will require limits of at least $1 million per occurrence and $2 million annual aggregate.
How Much Does General Liability Insurance Cost?
General Liability insurance coverage does not need to be expensive. It could cost as little as a couple thousand dollars (per year), or even less, depending on your business’s revenues and the types of bodily injury and property damage risks you face.
The best way to determine the cost is to contact your local insurance agency and ask them to provide you General Liability insurance quotes. It is likely that they will quote this coverage as part of a package that will also include Property insurance coverage, which protects you for losses related to your business’s personal (and “real”, if any) property.
Conclusion
Small business insurance can be complicated and it can be a bit intimidating, as the policies and those who sell them use a lot of words that are not common in everyday business or other usage. For example, what’s a waiver of subrogation? That will be a question for another day, but it’s an example of insurance terminology that you don’t hear in everyday conversation.
Most importantly, though, you need to find an insurance broker or agency that you’re comfortable with, so they can help you navigate the process of buying insurance to protect your business. You may also want to consider hiring an insurance consultant, particularly if you are unable to find a broker or agency in which you have 100% confidence.
When you are legally responsible to pay for damages that your business or your employees cause, it is important that you have effective business liability insurance in place that will cover claims that arise. General Liability insurance is one of those coverages that you’ll want to have in place.
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