Many small business owners have a general liability insurance policy to help protect their companies. You may be asking yourself, “What does general liability cover?” This insurance helps protect your business from claims of:
- Bodily injury
- Property damage
- Advertising injury
- Copyright infringement
- Reputational harm
Liability claims are common and can come up during normal business operations. They can get expensive for small businesses and many don’t have the resources to cover a liability claim. Did you know the average cost of a slip and fall claim is $20,000?1 And if you’re faced with a reputational harm lawsuit, be prepared that they’re around $50,000.2 Without liability insurance coverage, your business would have to pay these costs out of pocket.
A General Liability Policy for Your Business May Cover the Following Claims:
- Bodily injuries and property damage your business may have caused. This can include customer slip and falls or employee accidents, like breaking a client’s windows while working at their home.
- Advertising injury that your business causes by defaming someone else or another company.
- Copyright infringement from using someone else’s work in your business’ ads without their permission.
- Reputational harm if something you said in an interview about another business owner negatively impacts their company.
What Does Liability Insurance Cover for Business?
General liability insurance, also known as commercial general liability insurance or business liability insurance, helps cover:
- Costs for property damage claims against your business
- Medical expenses if someone gets injured at your company
- Advertising injury claims against your business
- Administrative costs to handle covered claims
- Court costs, judgments and settlements for covered claims
Your general liability insurance can help cover claims up to the coverage limits in your policy.
What General Liability Insurance Doesn’t Cover
Be aware that general liability insurance doesn’t cover everything. For some claims, you’ll need different types of liability insurance to give your business more protection.
A general liability insurance policy won’t help your business with:
Commercial auto accidents that you or your employees cause while driving for work. A commercial auto insurance policy can help you cover the cost of damages.
Employee injuries or illnesses resulting from their work. Workers’ compensation insurance gives your employees benefits to help them recover from a work-related personal injury or illness. For example, it can help cover an employee’s medical bills and ongoing care expenses. Most states require this coverage if you have at least one employee. Depending on your state, you can get this insurance from a private insurance company, a state-run agency or a monopolistic state fund.
Damage to your own business property. You’ll need to get a commercial property insurance policy to help protect your owned or rented building and business equipment.
Errors in professional services that your business gives. Professional liability insurance can help cover your legal costs if a client sues you for a mistake in the services provided.
Claims that cost more than your policy limit. So, you’ll need commercial umbrella insurance which can help extend your general liability limits to help cover expensive claims.
Illegal acts or wrongdoing that you or your employees did purposefully.
The Dangers of Not Having General Liability Insurance
Judgments, settlements, legal defense fees and court costs can be extremely expensive. If someone files a claim against your business:
- You’ll need legal counsel, which can cost over $100 per hour.
- Costs could easily exceed $75,000 if the claim ends up in court.
- You may need to spend several thousands of dollars, even if lawsuit gets dropped.
When you add the cost of administrative work, legal secretaries and any settlements or judgments, your business could face a bill totaling hundreds of thousands of dollars. The right general liability insurance policy can help your business cover these costs.
Who Needs General Liability Insurance?
State laws generally don’t require you to carry general liability insurance. However, not having coverage could put your business at financial risk.
You may also find that businesses will want to make sure you have the minimum coverage they require before agreeing to work with you. They want to make sure your business can survive a liability claim and continue to do what they hired you to do. So, they may ask you to provide proof of insurance, also known as a certificate of insurance.
Consider Buying General Liability Insurance if You:
- Have a store, office or building that’s open to the public, clients or vendors
- Handle or work near client property
- Advertise or create marketing materials for your business
- Use social media personally or professionally
Source: The Hartford, “What Does Liability Insurance Cover?” https://www.thehartford.com website. Accessed November 10, 2020. https://www.thehartford.com/general-liability-insurance/what-does-general-liability-cover
© Copyright 2020. All rights reserved. This content is strictly for informational purposes and although experts have prepared it, the reader should not substitute this information for professional insurance advice. If you have any questions, please consult your insurance professional before acting on any information presented. Read more.