Establishing a small business takes so much out of an entrepreneur. Money, time, energy, and a whole lot of heart can turn a dream into a company to be proud of. Unfortunately, 75% of small businesses are underinsured, and 40% are not insured at all. This can put them at risk of claims that can hurt their finances.
With general liability, a small business and its stakeholders can stay protected and safe from costs brought about by unprecedented situations.
General liability insurance, also known as business liability insurance, is a type of small business insurance that covers a company against a variety of claims. Most of the time, general liability insurance coverage is provided against personal injury, bodily injury, and property damage.
Aside from this, general liability insurance protects the business from costs involving medical expenses, advertising injury, and damage to rented premises. Instead of having to shell out these damages from their own pockets, a business owner will have a safety net that will help them avoid serious financial loss.
If a company usually works with business-to-business (B2B) contracts, some require proof of general liability coverage before signing a deal. Indeed, a business must make sure to present a Certificate of Insurance (COI) containing all the information related to the business and the scope of their acquired insurance if asked.
Though it is technically not required by law, every business needs general liability insurance. The reasons are simple: Liability claims can be costly, and being buried under a mountain of payables is never good for business.
Business owners have to have general liability insurance if they fit one or more of the following criteria:
General liability claims can come from common scenarios like regular business operations, meeting with clients, representing clients, working on or with another person's property, and advertising one's business. These alone are strong enough reasons to get general liability insurance coverage.
Some contractors or clients won't sign a contract with small businesses that do not offer protection through liability coverage. Therefore, these liability insurance policies protect your business by showing all your stakeholders and target market that the company is serious and is ready to operate for the long haul.
Commercial general liability insurance protects against legal fees from third-party lawsuits. In particular, here are some incidents that show how this coverage helps home businesses, contractors, and small businesses:
| Home Business | Contractor | Small Business | |
| Liability Protection | General liability can help pay for situations like couriers slipping and falling from deliveries in your home. | General liability can assure your clients that you have insurance in case of damage to their property or equipment. | General liability will help you get a commercial lease, as it is a common landlord requirement. |
| Advertising Injury Protection | General liability can help you protect your websites against copyright infringement. | General liability can protect you from projects where you might be at risk of libel or slander accusations. | General liability can help you against possible lawsuits involving your advertising campaigns. |
Once you’re ready to apply for a general liability insurance policy, you should choose your insurance provider and start with your application.
To start, you will be required to fill out a form. Here, you must provide basic information about your company, including the name, nature of business, the number of employees, revenue, and other business operation details.
After this, you will receive a quote you can review. You can have discussions with your agent until you finalize the agreement.
Once your insurance policy is finalized, you will be given an insurance certificate by your provider. This serves as your proof of insurance. This certificate has a summary of your general liability coverage, including the terms of the policy and the extent of the coverage.
If you did not receive the certificate in the initial insurance documents you received, feel free to request one from your insurance company.
In a typical general liability policy, the extent of coverage extends to the following:
General liability provides coverage against bodily injury on a third party brought about by an incident related to the business. For instance, if a customer slips and falls in your physical store or if an employee scalds a customer's hand with a hot beverage in the office. However, it is important to note that the coverage does not include injuries sustained by employees on the job.
In claims like this, the insurance can get medical expenses up to the policy limit, the income they lost from missing work, and other claims related to pain and suffering.
Aside from physical injuries, there is also a possibility of a property damage risk during business operations. For instance, vehicular accidents, machinery incidents, and equipment failures that damage any property owned by a third party are included in general liability coverage.
Business owners can also get coverage for their products or the completed operations of their services. Whether the company manufactures, sells, or distributes goods, if a customer gets ill or injured from these products, a business with general liability insurance can receive the protection they need.
On the other hand, a business involved in building or repairs can make mistakes that result in damages instead of convenience. In this case, a liability claim can also be filed against the service provider. Therefore, the business needs general liability insurance to help cover defense costs and other charges.
The damages a business can inflict on another are not limited to a person or a property. Verbal or written communication can cause harm, as well. In cases like malicious mischief, copyright infringement, libel, or slander, businesses can get damaged reputations and profit losses. Commercial general liability insurance will help small business owners against cases like this.
Medical payments coverage refers to all medical and funeral expenses faced by any non-employee after being injured on the job site or while working. The extent of the medical coverage, however, varies depending on the policy limits.
Though this type of liability insurance seeks to provide the ultimate support for business-related claims, it still has limitations. For different claims, other kinds of business liability insurance can strengthen protection from a business.
These are the concerns that will not be covered by general liability:
If there is a risk for customers to encounter accidents while they are on a job site, the same risk also happens to a company's workers. For claims about an employee injury on the job and illnesses developed through employment, Workers' Compensation Insurance will cover the charges.
Most states in the country declared Workers' Compensation to be required by law for every company with at least one employee. This can be acquired from a private insurance company, an agency run by the state, or a monopolistic state fund.
Vehicular accidents happen all the time, so there is a high chance that an employee might encounter one while driving for any work purpose. To pay for the damage to the employee, commercial auto insurance will cover all of the costs.
If a business is focused on offering professional expertise as a service, there are chances of customer dissatisfaction due to an error in judgment or an omission that might be done. As these things equate to getting sued by these customers, a business should also acquire professional liability insurance.
Another important thing for owners to consider is how to protect their company's office, building, or equipment. To avoid extreme losses in case of any type of accident, the owner must make sure to add commercial property insurance to their list of policies.
In 2019, the average monthly cost of general liability insurance reached $53. However, this is not necessarily what a specific business has to pay. There are various things that can affect the total cost, some of which are the following:
Different businesses also change depending on the intensity of the risk they come with. Companies in industries with more danger, equipment handling, and other hazards will get higher insurance costs because of the increased liability.
Seeking to get higher limits for your insurance coverage will equate to higher costs. When an owner is feeling unsure about how much they would need in terms of coverage, the best decision would be to discuss with an agent or a trusted insurance company.
How big a business is and the number of employees will also directly affect the cost of insurance. The bigger it is, the bigger the insurance costs would be.
The cost of insurance can significantly differ from state to state. But, even within the state, different zones can also affect the cost of insurance. The location has a strong influence on the overall cost of influence, so it is something to consider when owners are browsing for a spot for their company.
Business owners can ask for a commercial general liability insurance quote from a reputable agent for a personalized computation. Every insurance company offers a different rate, and that can be influenced by how detailed and extensive the overall insurance package will be.
At first glance, it might seem that general liability's sole purpose is to protect the business against damaging third-party accidents, whether to their bodies or their properties. However, there are other benefits of maintaining this policy.
When a company has business liability insurance, they show their customers and prospects that they take their job seriously. Seeking operational protection gives their clients peace of mind as they will see the business as responsible and trustworthy, even during possible accidents or mistakes.
In cases where a business has various competitors, its insurance coverage will give them a competitive edge over those who do not care about getting insured.
Though general liability might not be technically required by law, there are cities and states that require a Certificate of Insurance before awarding a business permit. As a business owner, one should never allow themselves to be on the bad side of the law if one wants to last in the long run.
For many businesses, especially newer ones, there might not be an owned piece of real estate to establish an office in. In the world of leasing commercial property, many landlords would also require an insurance certificate.
Why would landlords ask for this? Having these policies will give them the assurance that a business has financial protection in case there will be a need to cover any expenses related to the property should accidents happen in the rented space.
Starting a business can be tough, as there are hundreds of things to think about, and it can be hard to reach peace of mind. When one gets general liability insurance, they can get at least some things off of their plate. They can be free from worrying about what would happen should a customer fall or trip.
Having liability insurance will give an entrepreneur the opportunity to be free from feeling nervous about the worst that could happen. Instead, they can think about ways to improve their business and grow their market.
Just like a small business owner, independent contractors will also benefit from having general liability insurance. With this coverage, independent contractors will:
Do you think general liability insurance does not offer enough coverage for your particular business need? You may consider adding these types to your policy:
With various types of insurance coverages available, it is important to differentiate general liability from other liability coverages. In choosing between general liability and professional liability, here’s what you must know. The main difference between the two is the type of risk they will protect you from.
General liability insurance covers physical risks, such as bodily injuries, the medical payments involved, and property damage you or an employee caused. Overall, it is ideal for all small businesses to have this coverage.
On the other hand, professional liability insurance will protect your business if your client claims financial or reputational damage coming from the professional service you provide. This coverage is ideal for businesses in healthcare, law, consulting, technology, and finance.
Before you start looking for the best general liability insurance provider, it is best to be informed. Here are some of the answers to the most asked questions about this policy to help you decide.
General liability insurance provides coverage for common lawsuits that arise from regular business operation activities. The protection extends to claims surrounding customer injuries, customer property damages, and advertising injuries like accusations of defamation.
The average general liability insurance cost is $42 per month or $500 per year. It can go higher or lower depending on the risk levels of the company, its industry, and its history of former claims. Usually, businesses like construction, landscaping and cleaning have higher premiums in comparison to office jobs like IT, accounting, and finance.
Small business owners generally go for two types of general liability insurance, either a 1 million policy or a 2 million aggregate policy. On average, a 1 million dollar business liability insurance policy would cost $300 to $1,000 a year, depending on the limitations.
On the other hand, a 2 million dollar policy ranges from $500 to $1,300 annually. For those with larger businesses in need of more coverage, a 5 million dollar policy usually costs $700 to $1,500 per year.
General liability insurance offers protection against personal injury and property damage claims. However, not all businesses are the same, and there are specific coverages you need that are beyond the scope of general liability. Here are some kinds that you might need:
-Workers’ Compensation: Workers’ compensation coverage is for expenses related to employee injuries and illnesses from the workplace. It is a legal requirement in almost all states, and it protects your most valuable asset — your people.
-Professional Liability Insurance: Also known as errors and omissions insurance, this coverage will protect you from claims that your services caused monetary or reputational damage to your clients.
-Business Owner’s Policy (BOP): A BOP is a policy that combines general liability with commercial property insurance and business interruption insurance. It is an ideal option for small to medium businesses that would prefer a larger scope of coverage.
-Business Equipment Protection: Business equipment protection covers the equipment your business owns and uses for your operations. Unlike other coverages that look into your client’s property, this policy looks at those you own.
Managing risk goes hand-in-hand with operating a business, so it is important to address those risks and be prepared for whatever might happen. As much as anyone would never want an accident or mistake to happen, humans are not perfect creatures, and there are companies with the dangerous nature of work.
Therefore, it is always essential to educate yourself on general liability insurance and other insurance options to protect the overall welfare of your business.
Decode coverage distinctions: Our latest blog post dissects Employers Liability Insurance vs General Liability to help you navigate the intricacies of essential business protection. Explore to make informed decisions.
What else would you want to know about general liability insurance? Let us know! Contact Assured Standard today!
