What is General Liability Insurance? Everything You Need to Know

Employee working inside food store

In the world of small business, four out of 10 companies will face a liability claim within 10 years. With those odds, it makes sense that many new business owners prioritize general liability insurance to cover the unexpected.

So, what is general liability insurance?

This article has the answers you need. We'll help you understand what general liability insurance covers and how it fits into a Business Owners Policy.

What Is General Liability Insurance?

General liability insurance could take care of third parties who suffer injury or property damage due to your business. There is a wide range of scenarios where general liability insurance can be a benefit for a business owner.

With commercial insurance, general liability insurance is one of the core components of a Business Owners Policy. When you're first starting a business, general liability is considered to be important if you want to help protect your business. Even if you feel like you are protected from third-party claims by the nature of your business, they can still show up in unexpected ways.

General Liability Insurance Benefits

There can be many immediate and ongoing costs involved in correcting general liability claims. There is also a broad range of circumstances where a claim might arise.

Third-Party Injury or Property Damage

If your business causes harm to somebody or damage to their property, your general liability insurance company will help cover medical costs and compensation. Let's say a customer walks into a flower shop, slips on a wet spot, and breaks their leg. Insurance could provide payments for the hospital bills.

Slip and fall cases usually have many long-term costs associated with them. The settlement costs covering loss of income or pain and suffering can be much higher than the immediate medical bills.

Employee accidents that result in property damage may also be covered, whether they occur on the premises or not. If you run a landscaping business, for example, and one of your team members accidentally damages property owned by the customer, you could be covered.

Court and Attorney Costs

When an injury or damage claim is made, you may face a lawsuit as well. Your general liability insurance company can step in to cover costs to help move the process through the court.

The insurance company will help pay for your attorney and legal defense fees as well as insurance investigation costs in most cases. They could also take care of bonds and settlements.

Reputation and Advertising Injury

Outside of physical injury, general liability insurance also covers reputational damage. If you need one good reason to get coverage, it's to protect against these cases.

They aren't concerning because they happen frequently. On the contrary, they're one of the least common claims, occurring for fewer than five percent of small businesses. The real reason is that, at an average of $50,000 per claim, they are by far one of the most expensive claims to cover.

Your insurance will help cover the legal costs if an individual's reputation is harmed by your business. For example, if you or an employee mention an individual in a radio interview, and it hurts their business, they may sue you. Slander and libel are the most common sources of lawsuits, but if a person feels their reputation was harmed by your business in another way, you may still face litigation.

Copyright infringement and advertising injury are also covered. You may, for instance, unwittingly put a photographer's photo on your website without their permission. Insurance could cover expenses for lawsuits from these claims.

Claims-Made Policy vs. Occurrence Policy

Businesses usually opt for either a claims-made policy or an occurrence policy. It's critical to know the difference between the two, as it can greatly affect whether your insurance will cover claims.

A claims-made policy takes care of claims as long as the policy is active when the claim was made, not when the incident happened.

An occurrence policy covers any injury or damage even if the claim was made after the policy ended. If the injury occurred during the policy period, it doesn't matter when the claim is made. Most Business Owners Policies are written to provide general liability coverage on an occurrence basis.

Exclusions and Additional Types of Liability Insurance

A general liability policy covers many incidents, but it is limited to damage or injury caused by your business or happening on your premises. For many reasons, you may want to look for different types of liability insurance to cover the gaps caused by general liability.

Employee Injury

General liability covers third parties from injury but not employees. If an employee is hurt on the job, you may want to consider purchasing Workers' Compensation insurance. Your insurer could cover the costs of treatment, ongoing care, and lost income as needed.

Damage to Your Property

If you damage someone else's property, you'll be covered with general liability. However, when damage happens to your business property, you'll need additional insurance. In many cases, damage that might happen to your property would be covered by commercial property insurance.

With commercial property coverage, your equipment has protection from perils like natural disasters, accidental fires, or theft and vandalism. It's one of the most basic insurance plans for any business and could cover expenses to repair or replace equipment.

Cyber Risks

Companies large and small face cyber security threats, and your customers can suffer damage in this area as well. In your payment portals and other network activities, a data breach could put customers' information, like credit card information, SSNs, or account numbers, at risk.

Information security is a growing concern in light of high-profile data breaches that have happened in recent years. Software attacks can hurt you and your customers in several ways, and cyber insurance can provide valuable protection from occurrences including:

  • Customer, employee, and business data loss or theft
  • Financial loss from hackers and data breaches
  • Business reputational damage from viruses, ransomware, and extortion

Policies may not only cover financial damages for you and your customers, but they can help hire professionals to identify the cause and extent of a cyber-attack. If your business uses email marketing, takes online payments, or stores customer data via software, you may want to consider cyber risk insurance.

Business Owners Policy

A Business Owners Policy (BOP) is a combined insurance option that fits the needs of nearly any small business. These plans bring together several key policies that offer coverage for various risks that most small businesses face in their daily operations.

A BOP from PolicySweet® puts commercial property, general liability, and cyber risk insurance under one plan. A BOP provides a single convenient way to manage all types of claims. It may also save you money.

How Much Does General Liability Insurance Cost?

General liability insurance can be inexpensive for basic coverage. Policies usually have a payout limit of $1 million per occurrence, or $2 million a year total. However, you'll find the cost of insurance can change based on several factors, including:

  • Policy amount
  • Business size
  • Claims history
  • The risk associated with your business

Whether you work from home or have multiple storefronts, there are always opportunities for a third party to file a claim. Pairing general liability with commercial property and cyber risk can cover most claims.

Talk to an Agent About General Liability Insurance

What is general liability insurance? It can be sound protection and a solid foundation for any business owner.

If you're starting to shop for small business insurance, talk to one of our agents about general liability in your Business Owners Policy. A Business Owners Policy could provide peace of mind that you could have protection in case anything unexpected happens with your business.

Are you ready to get started on a quote for your small business? Contact the experts at PolicySweet for more information on getting insurance rates and coverage for your business.


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