What Does General Liability Insurance Cover?
General liability insurance protects your business from a variety of possible claims including #propertydamage, #bodilyinjury, #copyrightinfringement, #reputationalharm and #advertisinginjury.
Property damage is a common liability claim. As a business owner, you may be legally responsible if a person’s property is damaged while at your business. Property damage claims would also include damage to a client’s home or other property when you are visiting them on business. This coverage can also apply to damage to electronic data.
Bodily injury caused by your business is a common claim. If someone is injured when in your place of business, you would need a general liability policy to cover their medical costs. A bodily injury claim could be something as simple as a fall by a customer at the company store or business office.
Copyright infringement claims come about when you are accused of using someone else’s work in your business ad or other business marketing without their permission.
Reputational harm may occur if you said something in a news interview about another business owner or business that hurts their business.
Advertising injury can happen when your business defames another person, business owner or company.
These types of liability claims are prevalent so you’ll want to keep your business protected. Paying for a claim on your own can be very expensive without general liability insurance. For example, the average cost of a slip and fall claim is $20,000. And if you face a reputational harm lawsuit, you’ll be facing $50,000 in costs, according to The Hartford. Without general liability insurance, you would have to pay for a pricey claim or lawsuit all on your own.
How Much General Liability Insurance Coverage Do I Need?
Most small businesses choose standard coverage amounts of $1 million per occurrence and a $2 million aggregate policy limit for their general liability insurance coverage, according to Insureon. This type of policy will pay up to $1 million to cover a single general liability insurance claim with a $2 million limit for the policy period. The policy period is typically one year.
Should you be hit with a claim, your general liability insurance can cover the claim’s cost up to your coverage limits. But you’ll need to pay a deductible first. A deductible is the amount you need to pay toward the claim before the insurance company starts paying. You choose a deductible amount when you buy general liability insurance.
The cost of general liability insurance coverage varies based on the size of the business, your industry, your location and the amount of coverage that you need.
General liability insurance typically costs $30 a month or less, according to Hiscox.
You can manage general liability insurance costs by choosing the insurance limits that best meets your needs. Your insurance limit is the amount the insurance company will pay for a single claim or all claims during the policy period. Choosing these limits wisely will help to lower your insurance costs.
What Business Liability Insurance Doesn’t Cover
General liability insurance covers a lot for your business but it doesn’t cover everything.
It won’t cover business-related auto accidents, employee injuries and illnesses, damage to your business property, mistakes in professional services, claims that exceed your policy limit or illegal acts that you or your employees did on purpose.
For these kinds of liability claims, you’ll need different types of business insurance.
For commercial auto accidents, you’ll need a commercial auto insurance policy if you own the car and use it for business. Hired and non-owned auto coverage will cover you if you are renting a car that you drive for work or if you are using your car for work purposes.
For employee injuries and illnesses caused by their work, you’ll need workers compensation insurance. Most states require this coverage if you have at least one employee. You can get workers compensation from a private insurance company or a state-run agency.
Damage to business property is covered by commercial property insurance. This type of policy protects rented or owned business offices or buildings as well as business equipment.
Errors in professional services can be protected with professional liability insurance. This insurance covers legal costs if a customer or client sues you for a mistake in your professional services. This insurance is also called errors and omissions insurance.
Claims are covered up to your policy’s liability limit and no higher. A good way to extend your business liability insurance is by purchasing an umbrella policy. This will give you protection from expensive lawsuits.
Any deliberate, illegal acts or wrongdoings by you or your employees will not be covered by general liability insurance.
The Risks of Not Having Business Liability Insurance
Facing judgements, settlements and legal fees without the aid of general liability insurance can be very expensive and even bankrupt your business. Legal counsel can cost more than $100 an hour. Court costs may exceed $75,000 if the claim goes to court and you may need to spend several thousand dollars even if a lawsuit is dropped, according to The Hartford.
Not having general liability insurance puts your business at financial risk for several liability claims. And you may lose clients because they won’t do business with you if you don’t have general liability insurance.
To prove that you have insurance coverage, you’ll need a certificate of insurance. A certificate of insurance is an official document that lists all the coverage types and limits on an insurance policy. Once you get a certificate of insurance and share it with your client, you are ready to go to work.
Who Should Buy General Liability Insurance?
Here are situations where you’d benefit from business liability insurance coverage:
Your business is open to the public or clients or vendors
You advertise or create marketing materials for your business
You use social media personally or professionally
You use third-party locations for business activities
You need insurance coverage to be considered for work contracts
You have temporary employees