There are several disasters that might severely impact your bottom line. For example, your employee may spill paint over items. A consumer may be injured if they step on a rug at your business.
Alternatively, you might be sued for creating reputational injury to another company as a result of anything you or your employee stated.
A small business's general liability insurance covers these sorts of issues (and more). It is an essential sort of coverage for small company owners.
What Is the Definition of General Liability Insurance?
General liability insurance is a sort of small business insurance that protects your company from bodily harm and property damage caused by others. It also addresses issues such as advertising damage, copyright infringement, and reputational harm.These claims may arise as a result of your company's products, services, or activities. Without general liability insurance, you risk losing your business's income and, in the worst-case situation, going bankrupt.
General liability insurance is sometimes known as "commercial general liability insurance" or "business liability insurance."
Other Liability Insurance Options for Small Businesses
While general liability insurance is essential, it does not cover everything. To fill gaps in coverage, your small business may require extra forms of liability insurance. Consider the following forms of liability insurance:- Insurance for commercial vehicles:
The liability section of business auto insurance covers third-party injuries and property damage caused by you or your workers while operating a work vehicle. Your personal auto insurance coverage will not cover the usage of a vehicle for commercial purposes.- Umbrella insurance for businesses:
This provides additional protection above and beyond the liability limitations on your previous insurance plans. For example, if a claim exceeds your general liability limits, business umbrella insurance might kick in to cover the balance you owe someone else.
- Insurance for cyber liability:
This policy protects a small business in the event of a cyber breach that exposes sensitive information such as your clients' credit card numbers, driver's license numbers, Social Security numbers, or health records. Cyber liability insurance is sometimes referred to as cybersecurity insurance or cyber risk insurance.- Insurance for professional liability:
This policy protects a small firm against claims of errors in professional services, such as incorrect advice, misrepresentation, carelessness, or a breach of good faith and fair dealing. Errors and omissions insurance is another name for professional liability insurance.- Insurance for product liability:
If your small business designs, sells, produces, or distributes a product, product liability insurance protects you against injuries and property damage caused by design flaws, incorrect warnings, manufacturing flaws, or marketing flaws.- Insurance for workers' compensation:
This covers medical expenditures and partly missed earnings for employees who are unwell or injured on the job. Other expenditures covered by workers compensation insurance include disability benefits, death benefits, and continuous care (such as physical therapy).What type of insurance do I require for my small business?
General liability insurance is the cornerstone of every small business insurance policy, but it is only one component of the answer to the plethora of issues that might financially harm your organization. Additional coverage kinds, such as fire, theft, vandalism, and lost company revenue, are expected to be added.
A business owners policy (BOP) is a smart place to start. It combines general liability insurance, commercial property insurance, and business interruption insurance (sometimes known as business income insurance) into one package.
Other forms of business insurance might be added to match your company's needs. For example, if you drive a car for business, you can get commercial auto insurance.
What Is Covered by General Liability Insurance?
General liability insurance protects a company from a wide range of potential claims, including physical harm, property damage, intellectual property infringement, reputational harm, and advertising damages.
- A typical claim involves bodily harm caused by a business. For example, if someone is harmed at your place of business, a general liability coverage would pay their medical expenses. A simple fall by a consumer at a business or workplace might result in a bodily injury lawsuit.
- Another typical liability claim is for property damage. If someone's property is harmed, your company may be held legally accountable. Property damage claims may involve damage to a client's house or other property while on business.
- Copyright infringement allegations arise when you are accused of utilizing someone else's work without their consent in your company ad or other commercial marketing.
- For example, if you're being interviewed by a news station and say anything terrible about another firm, it might impact their business.
- Advertising harm can occur if your firm defames another person, business owner, or corporation.
These sorts of liability lawsuits are common, so you'll want to secure your company with the correct insurance. A slip and fall claim, for example, costs an average of $20,000. According to The Hartford, if you are sued for reputational injury, you might face charges of $50,000.
A commercial umbrella insurance coverage is an excellent option to supplement your business liability insurance. This adds an extra layer of defense against costly litigation.
Who Is Covered by General Liability Insurance?
Here are some scenarios in which your company might benefit from commercial liability insurance:
- Your company is open to the public, clients, and vendors.
- You publicize or generate marketing materials for your company.
- You utilize social media for personal or professional reasons.
- You conduct business at third-party locations.
- To be considered for employment contracts, you must have insurance coverage.
- You have temporary workers.
What Kinds of Businesses Need General Liability Insurance?
General liability insurance is generally purchased by the following sorts of businesses:
- artisan builders
- Consultants
- IT consultants
- Cleaning services
- Landscape design firms
- Marketing companies
- Real estate brokers
- Owners of small businesses
Is General Liability Insurance Mandatory?
Although business liability insurance is not required by law, failing to purchase coverage exposes your company to a wide range of charges that might bankrupt it.
How Much General Liability Insurance Do I Require?
According to Insureon, most small companies pick conventional coverage limits of $1 million per event and a $2 million aggregate policy maximum for their general liability insurance coverage. This policy will pay up to $1 million for a single general liability insurance claim, with a total maximum of $2 million for all claims throughout the policy period. Typically, the policy duration is one year.
What Is the Cost of General Liability Insurance?
According to Insureon, general liability insurance costs an average of $42 per month. It might be less—29% of Insureon's small business clients pay less than $30 per month for general liability insurance.
The cost of general liability insurance varies depending on the size of your company, your industry, your location, and the quantity of coverage you require.
You may keep general liability insurance expenses under control by selecting the policy limits that best suit your needs. A business owners policy is a simple and affordable option to combine general liability and commercial property insurance. However, you may get general liability insurance on its own.
The cost of general liability insurance is determined by several factors, including:
- Your line of work. If your organization is high-risk, the cost of general liability insurance is greater.
- Your company's years of experience
- Your building's size, location, and condition
- Details about the policy, including as deductibles and coverage limits
- Your company's insurance claims history
The Dangers of Not Having General Liability Insurance
Without general liability insurance, facing judgements, legal settlements, and lawyer costs may be exceedingly expensive and possibly bankrupt a corporation. Legal counsel can cost more than $100 per hour. According to The Hartford, legal expenses may approach $75,000 if the claim gets to court, and you may need to spend several thousand dollars even if the action is abandoned.
Without general liability insurance, your company is financially vulnerable. You may also lose clients if you do not have general liability insurance.
A certificate of insurance is required to demonstrate that you have insurance coverage. An insurance policy's formal paperwork contains all of the coverage kinds and limitations.
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