The Most Common Myths About General Liability Coverage
The US Chamber of Commerce reports that over 33 million small businesses operate across the country. Combined, they account for 99.9% of all U.S. businesses. These businesses likely face potential risks every day, from accidents on their premises to damage to a third party's property.
Hence, it can be crucial to understand the importance of securing insurance for their operations. But, many entrepreneurs have misconceptions about general liability coverage. In this article, we'll help debunk some common myths and highlight how this type of insurance can help safeguard your business from unforeseen incidents.
General Liability Coverage Protects Everything
One common misconception is that general liability coverage is a cure-all for every conceivable risk. It can be easy to see why this belief prevails. After all, the term 'general' implies an all-encompassing solution.
But in reality, general liability insurance has its specific scope and limitations. It primarily covers third-party claims that could arise from your business operations such as:
- Bodily injury
- Property damage
- Advertising injuries
Let's delve into the types of general liability coverage. First, there's bodily injury and property damage liability. This coverage comes into play if a third party sustains an injury or their property is damaged due to your business operations. Next, personal and advertising injury liability can protect you against claims of:
- Libel; or
- False advertising
However, while general liability insurance can provide substantial coverage, it doesn’t cover everything. For example, it doesn't extend to claims related to:
- Professional errors
- Employee injuries
- Auto accidents
These claims fall under the umbrella of professional liability, Workers' Compensation, and commercial auto insurance respectively. Knowing what general liability insurance ;does and does not cover can help business owners better understand their protection needs.
Home-Based Businesses Don't Need General Liability Coverage
There has been a rise in home-based businesses in recent years. But with this growth comes a misconception. The idea is that home-based businesses might not require general liability coverage.
After all, you're running a small business from the comfort of your living room. How much damage could you potentially cause, right?
Wrong. Contrary to popular belief, general liability insurance can be as essential for home-based businesses as it is for brick-and-mortar operations.
The reason is simple. Regardless of where your business is located, there's still a potential risk of causing third-party bodily injuries or property damage.
Here's an example. Let's say you run a home-based graphic design business and a client visits your home office to discuss a project. If the client trips over a computer cord and gets injured, you could be held responsible.
Similarly, you visit a client's office and accidentally spill coffee on their expensive equipment. You could be liable for the damage.
In both these instances, a home-based business insurance policy that includes general liability coverage could potentially save you from costly out-of-pocket expenses. So, the next time you hear someone say that home-based businesses might not need general liability coverage, you can confidently debunk this myth.
All Business Insurance Policies are Expensive
For many business owners, especially small to medium enterprises, insurance is often seen as an expensive, luxury item. This misconception might stem from high-profile cases where larger corporations have had to shell out substantial sums for comprehensive insurance packages. However, the reality is that the cost of business insurance, including general liability coverage, can vary significantly depending on several factors.
The price of a general liability quote is determined by various elements such as your:
- Business type
- Perceived risk level
For example, a landscaping company with several employees may have a higher quote than a freelance graphic designer working from home due to the higher potential for workplace accidents.
Another point to note is that insurers offer different types of coverage tailored to various business needs. Policies like our Business Owners Policy (BOP) combine:
- General liability
- Cyber coverage
This could be more cost-effective than purchasing separate policies.
Most importantly, while there is a cost associated with purchasing insurance, the cost of not having adequate coverage when an accident happens could be exponentially higher. A single lawsuit or property damage can lead to devastating financial losses, possibly jeopardizing the existence of your business.
Small Businesses Don't Need General Liability Coverage
It's often assumed that small businesses don't need to purchase general liability insurance. Especially those with fewer employees or lower revenues. After all, what could possibly go wrong in a small-scale operation?
The answer, quite simply, is a lot. Even the smallest businesses are not immune to risk. In fact, due to their size and limited resources, small businesses may be even more vulnerable to the potentially crippling costs of a liability claim.
Consider this scenario: You own a small bakery. One day, a customer slips on a wet floor and breaks their arm. As the business owner, you could be held liable for:
- Their medical expenses
- Legal costs if they decide to sue
Without business general liability insurance, you would likely have to pay these costs out of pocket.
Small businesses are not exempt from accidents, mistakes, or unforeseen events. They interact with customers, work with suppliers, and have a presence in the physical and digital world. Each of these interactions can carry a degree of risk that could be mitigated with general liability coverage.
You Only Need General Liability Coverage if You Have a High-Risk Business
A myth that's often heard in the business realm is that only high-risk businesses need to worry about obtaining general liability coverage. This notion is both incorrect and could potentially be harmful.
It's not just landscaping companies or hazardous businesses that might require protection. Almost every business, regardless of the industry, carries some level of risk.
Think about it. No matter how careful you are or how safe your business operations might seem, accidents can and do occur.
This could be something as commonplace as a client slipping on a freshly mopped floor in your office. Or a more unusual incident like a piece of your equipment inadvertently damaging a customer's property. Unforeseen incidents like these are unpredictable and don't discriminate based on your business type or the industry you're in.
Furthermore, general liability coverage isn't just about physical accidents. It can also be about:
- Allegations of defamation;
- Copyright infringements; or
- False advertising
Almost any business, regardless of its nature or size, can face these claims.
Choosing Coverage for Your Business
Many myths surround general liability coverage, but as we've explored, they can be far from reality. Understanding the nuances of this coverage and how it can protect your business can be crucial.
At PolicySweet®, we strive to make insurance simple and understandable. With our tailored Business Owners Policy (BOP) and HomeHQSM coverage, we can help you manage potential risks to your business, property, and even the cyber realm.
With our general liability coverage, we can help your business navigate the unpredictable future with confidence. Reach out to us today to discuss how we can help keep your business safe!