If you operate a business, you may be wondering if you should obtain general liability insurance. Perhaps you’re trying to determine if your business has enough risk to make it worth the investment, or maybe you just want to know if it’s legally required for you to have coverage.
This guide will discuss the ways in which general liability insurance can protect your business, what exactly general liability insurance covers, how much coverage you should pursue, and more.
General liability insurance is a coverage that protects your business against certain types of common damage claims. If you don’t have general liability insurance, you will likely need to cover the cost of those claims yourself, using your own assets.
With general liability insurance, your business is protected from having to pay the full cost of the following common claims:
Example: A customer slips and falls on a wet spot on the floor of your business, breaking their arm. They sue your company and your general liability insurance covers the cost of their medical bills and lost wages.
Example: One of your employees is operating equipment on your property, when they accidentally damage a neighbor’s building. Your general liability policy helps cover costs incurred repairing the damage to the neighbor’s property.
Example: Your business debuts a new advertising slogan that is very similar to the catchphrase used by a competitor. They decide to sue you for your advertising practices, which are covered by your general liability policy.
Example: In an interview with a local TV news crew, you make the claim that your business is more efficient than a leading competitor. Your competitor sees the report on the news and refutes the claim, suing your business for damaging their reputation unfairly.
While general liability policies do cover a wide variety of claims, there are still some specific areas that remain uncovered by these plans. Below are some of the ways that general liability insurance does not help mitigate your business’ risk.
Legally speaking, your business is not required to hold general liability insurance. However, practically speaking, few companies can withstand a significant liability claim without it, and these claims are very common. As many as 40% of all small businesses will experience some sort of liability claim in the next decade.
In addition, many larger companies will not want to do business with a company that does not carry general liability insurance. If you don’t have a liability policy, and someone makes a liability claim against your company, there’s a very strong possibility that you’ll go out of business. This would leave anyone you’re doing business with in a terrible position.
If you own any type of small business, you should at least consider acquiring general liability insurance. Some businesses have such minor risk involved that it may not be necessary. For example, if you’re a sole proprietor who operates a freelance writing and editing business out of your home, there’s no real reason to purchase general liability insurance.
For just about anyone else though, if you’re a small business owner or a contractor, you absolutely should pursue general liability insurance. Even one mishap can bring a lawsuit down on your company that you can’t financially handle, putting you out of business and potentially ruining your personal finances as well.
So in short, if you operate a business that deals with customers on-site or that in any other way puts you at risk of being responsible for injuries, medical payments, or lawsuits, you need general liability insurance.
There’s a considerable amount of variance when it comes to the amount of general liability coverage businesses acquire. Depending on the nature of your business, your company’s size, your location, and other factors, you may need significantly more or less coverage than the typical business.
Still, there are some basic facts and figures that can give you a general idea of how much coverage a typical small business will require and what it will cost.
We often encounter entrepreneurs who are confused about the difference between general liability and professional liability insurance. While general liability policies typically cover claims like third-party injury and property damage, professional liability is more specifically tailored to your business type.
Professional liability insurance covers claims like mistakes in your company’s professional services, omissions in work performed, and failure to uphold contracts. Depending on the nature of your business, a professional liability policy is an equally important piece of your insurance puzzle.
General liability insurance is something that most businesses cannot do without. It covers a great deal of common claims at generally affordable rates. If your business incurs any risk at all, it’s almost always advisable to acquire general liability insurance. It often only takes one claim to wipe out an uninsured business.
While general liability insurance isn’t a catch-all policy, it does cover many of the most common lawsuits filed against businesses. With a few exceptions, it’s advisable for every small business to acquire general liability insurance.