What is general liability insurance?
General liability insurance helps businesses pay for any third-party injuries, property damage, unexpected lawsuits, which may result in bankruptcy. Commercial general liability insurance (CGLI) helps businesses from claims that happen as a result of normal business operations. Hence, liability insurance not just provides liability protection to the third party but also adds value to small businesses.
Many business owners wonder why they require liability insurance. As per the U.S chamber of commerce, small business owners don’t understand the CGL insurance entirely, which is detrimental for a company’s survival. The answer is simple; having a general liability insurance can impact small business reputation positively.
- Increases client contracts: Clients don’t want to be liable for your mistakes. Having a small business liability insurance will ensure higher safety standards for your business. Therefore, this will encourage trust between the client and your business.
- Demonstrates responsibility: In case of any accidents that occur on the job, your business will be liable to pay for the damages. Therefore, having CGLI demonstrates that you have yours and your client’s business in the best interest in mind.
- Establishes trust: Having a CGLI implies that you are serious about the job and the risk associated with it. Hence, it reinforces trust and shows that you are not willing to risk your business’s future.
As a business owner, you may be legally responsible for any bodily or property damage to a third party while you are at your business. You have to make sure your business stays protected against risks of accidents. According to Insurance Journal, one of the costliest liability claims is customer injury or damage, which can cost your business a minimum of $30,000.
Suppose you run a photography business, and without your knowledge, one of your camera equipment caused a mark on the floor at a venue. The venue owner can make you pay for the cost of repolishing the floor of the site or worst-case scenario; can sue you for property damage. According to an article published by Azcentral, between 36% to 53% of small businesses are involved in lawsuits each year.
What does general liability insurance cover?
Having commercial general liability (CGL) insurance is not mandated by law, but it offers as a reassurance to your clients. Liability claims are common and can get expensive for any small business. Therefore, having CGL insurance will help you protect your business from liability claims alleging:
- Property damage: When a property is damaged or destroyed because of your company’s negligence, you can face a lawsuit for the damage. Here, commercial liability insurance makes sure that such mishaps don’t interrupt the growth of your company.
For example, a contractor is working on a home renovation project. One day, he accidentally causes severe damage to the wall and the client sue him. General liability insurance coverage can help to pay for the loss.
- Physical injury: Every type of business has a risk of bodily injury to clients, visitors, or other people. If anyone is accidentally injured at your business premises or because of your business, CGLI will help you cover the medical losses.
For example, you put your equipment down on the pavement while you’re loading your van in the morning. A stranger doesn’t see it there and falls over it, breaking his hand. They can sue you for the medical cost.
The third leading cause of death in the U.S is from accidental injuries, according to the National Safety Council.
- Advertising injury: If your business advertisement causes harm to other parties, such as using someone else’s ideas in your ad. In such cases, CGLI will protect your business against any advertising injury, including social media risks.
- Defense cost: The legal defense and court expenses can cost hundreds or thousands of dollars to your business. Hence, having a CGL policy can help you cover these costs.
According to White and Williams, a recent lawsuit filed against Northern Properties for failing to clean and maintain the properties they give for rent. The insurance company covered losses for Northern Properties. They had a CGL policy and all the court expenses were covered by the insurance company.
- Personal injury: Commercial general liability insurance protects your business from any personal injury. Personal injury might sound similar to physical harm, but it’s not the same. CGLI protects you against non-physical damage such as defamation of character.
- Libel and slander: CGLI will help you cover the legal costs in case your competitor sues you for causing damage to their reputation.
For example, your employee said something negative about your competitor’s product during an interview, which is not true, and they file a lawsuit against you. In this case, general liability coverage can help you cover for the damage.
According to the New York Times, approximately 40% of business owners have no insurance at all. Hence, when faced with any lawsuit or disaster, many businesses have to shut down to cover the losses.
Even though general liability insurance covers a wide range of claims, it has its limits. For example, the policy doesn’t include employee injuries, which is addressed by workers’ compensation insurance.
Commercial general liability coverage doesn’t cover damage to your property that occurs due to fire, theft, or natural disaster. However, you can opt for a business owner’s policy to protect your business from such accidents. General liability business insurance is usually bundled with commercial property insurance and is available as a package in a business owner’s policy. It is also available as a stand-alone coverage depending upon your business.
Some policies you might want to consider for your business:
Depending upon the nature of your business, you can consider adding the following policies
- Commercial umbrella insurance: Many businesses require broad coverage. Having umbrella insurance will provide extra coverage in case the liability coverage reaches its limit.
- Product liability insurance: This policy provides protection for bodily injury and property damage that occur away from your premises but are caused by your business.
- Liquor liability insurance: This policy protects you against claims for servicing or furnishing any alcoholic beverages during your business operations.
- Any mistake done by your professional that causes financial loss to customers or clients is not covered by general liability insurance but by professional liability insurance.
- If there is any lawsuit filed by your employee against your business, it is not covered by general liability insurance for small business. Therefore, employment practices liability insurance covers the risk.
- You get into a contract with the client, and some mishaps occur, your company fails to complete the given work. General liability will not cover the losses. Here, Contractual liability insurance covers the risks.
- If your work involves dealing with customers, like event production, also considered as high risk, you should add event insurance.
- If you use specialized equipment for your business, you might need specialized liability policies to cover your losses as well. For example, if you own a photo studio and use drones for capturing shots in events, you must consider commercial drone insurance. Mavicmaniacs describes your liability in detail for the damages caused by your drone in case of a crash or accident. You have to bear the legal liability as well as the property damage cost. Therefore, you must consider insurance for drones.
Some common endorsement and exclusions you must consider:
A general liability insurance policy is a versatile policy. Hence, you can modify your coverages by adding endorsements depending upon the risks that your business encounters. Some of the most common endorsements are:
- Property damage
- Injury to your employee
- Error in the services your business provides
- Supplemental liability insurance
These are some of the policies you can add to your general liability insurance coverage to meet the requirements of your business. Physical injury coverage is important owing to the rising medical costs. Zurichna states that healthcare costs in the US are expected to grow at a rate of 5.5% until 2027. Besides this, some of the coverages not covered in the public liability insurance are:
- If a business intentionally causes damage, commercial liability insurance will not cover the loss.
- Professional errors
- Employees discrimination lawsuits
- Vehicles used by a business
- Employee injuries
- Damage to your business property
- Personal injury claims made by your employees
- Illegal acts done on purpose
Types of insurance that includes commercial general liability insurance:
- Contractors insurance
- Landscaping insurance
- Handyman insurance
- General contractor insurance
- Lawyers insurance
- Accounting insurance
- Farm insurance
- Church insurance
- Entertainment insurance
- Beauty insurance
- Construction insurance
- Engineer insurance
- Truck insurance
- Livery insurance
- Art insurance
- Commercial drone insurance
- Food business insurance
- Restaurant insurance
- Food truck insurance
- Hotel insurance
- Consultant insurance
- Photography insurance
- Personal trainer insurance
- Pet business insurance
- Nonprofit insurance
- Real estate agent insurance
- Nursing insurance
- Gas station insurance
Multiple factors that determine general liability insurance cost:
Every business is different; the business liability insurance cost also varies depending upon the type of business. Hence, to determine your cost following factors are taken into consideration:
- Location: Highly populated areas with increased claims will usually pay more. For example, if you own a restaurant located in a busy downtown, you are at much higher risk for third party injury claims than owning a restaurant someplace else. Therefore, rates vary based on the state where you conduct business.
- Business exposure to risk: A small business that only delivers equipment will pay less than a company that deals with manufacturing equipment. Hence, a high level of risk will increase the insurance premium.
- Years in business: If you’re in business for a long time and you experience growing revenue, this could affect your premium.
- Your deductible: The deductible amount you choose for your insurance policy affects your premium. Therefore, if your deductible is higher, you pay a lower premium.
No matter how small your business is or how unlikely you think you will face a claim, you are exposed to liability risks at work. Lawsuits are increasing, and getting an insurance policy will cost very little when compared to the expenses your business will incur.
Frequently asked questions about general liability insurance:
Some of the commonly asked questions about general liability insurance are:
Do I need general liability insurance?
- You may need liability insurance if:
- You deal with any clients and vendors.
- Advertise or create marketing materials.
- Use social media for professional purposes.
Many companies also want to see your liability insurance before working with you. Therefore, having a general liability insurance and certificate of insurance acts as a bonus in getting clients
What is a certificate of insurance?
- A one-page document that verifies you have liability coverage and condenses crucial information about the policy is a certificate of insurance. It contains:
- Your policy number and it’s limit.
- Your insurance company name.
- Details of the start and end date of your coverage.
- A description of your operations.
Does general liability insurance have a deductible?
Yes, when you get a quote, you choose the amount of the deductible. Here, a deductible is a fixed out-of-pocket expense you agree to pay before your coverage starts to pay.
What is a comprehensive general liability insurance?
General liability insurance is also known as comprehensive general liability insurance, commercial general liability insurance, or business liability insurance. While all the terms may sound different, they offer the same coverages and bear the same risks.
Is general liability an all-risk insurance?
General liability insurance is not an all-risk insurance as it has its limits and exclusions. Even though it offers broad protection for your business, it doesn’t cover absolutely everything.