Expert answers to all your business insurance questions.
What is general liability insurance?
- Business Insurance Basics
If you’ve heard about business liability insurance but you’re not sure about what it covers or whether you need it, don’t worry. We’re going to unpack it for you.
First, the definition: General liability insurance is a coverage which protects you and your company in the event another party makes a claim against your company for bodily injury or property damage. It’s included in business owner's insurance but can also be purchased as a separate policy.
Frankly, almost every business should get general liability. It’s a pretty important coverage.
What incidents will general liability insurance cover?
General liability doesn’t cover everything, but it will protect your business against many unexpected incidents and problems. Let’s look at a few:
A third party bodily injury claim
Let’s pretend you run a landscaping business and often travel to different locations. What happens if you’re on location and one of your customers trips on a piece of equipment an employee left out? Who will be liable for that accident?
The answer, of course, might be you and your company. If anyone is injured on your property or as a result of your products or business operations, they can sue you for damages.
That’s what general liability insurance is for—it can help you cover the cost of any injury damages (and keep your company from capsizing under the weight of a hefty financial settlement).
A third party property damage claim
Now imagine a different scenario: in this one, your landscaping employee backs the company truck into a client’s street sign and destroys their brand new ($75,000!) electronic message center. Who pays for the cost of repairing the sign (and for any financial damages your client might suffer from not having street signage)?
Again, you and your business could be legally responsible. General liability would be a huge asset in this instance, potentially absorbing most of the financial burden for the accident — and assisting your company with legal operations so you can keep focusing on your work.
An advertising injury claim
General liability insurance can step in if anyone makes a claim against your business because of your advertising practices. For example, if another company files a lawsuit against you because your advertising is too similar or because it violates one of their copyrights, this coverage could step in to help with legal support and could cover at least part of the cost of any financial settlement.
A reputation harm claim
Let’s say that you and your business are being profiled on a local television channel. During the interview, the reporter asks you to comment on other options available in the neighborhood. You state that your closest competitor does quality work but is too small to do large projects efficiently. Your competitor sees this interview and then files a claim that you’ve harmed their reputation. Oops.
Not a great situation. But, if it happens, general liability insurance will be there for you.
How does general liability insurance help?
If you run a small or medium-sized business, you probably don’t have the funds necessary to fight a legal battle and run your business at the same time. General liability insurance steps in with funds to cover your legal teams, witness fees, and evidence costs and will cover at least part of any financial settlement you may be forced to pay.
In short? A lawsuit could, quite literally, put you out of business. General liability could very well save your company.
Is general liability required by law?
No, but you should get it anyway. Four out of ten small businesses will have a liability claim filed against them in the next ten years, and the cost of most of these claims runs to the tens of thousands of dollars. At least.
Also, if you run the kind of business which contracts with larger companies, you should know that being adequately insured is often a prerequisite for winning large contracts. Big companies want to know that their contractors are stable and that you won’t go out of business halfway through the project because of a liability claim.
Should I get general liability insurance for my business?
Again, the answer is almost certainly yes. Nearly every business should get some form of liability coverage to protect their assets and to help them avoid bankruptcy. That’s why most small- and medium-sized businesses get liability coverage (usually packaged in a business owner's policy for convenience) very soon after they begin operating. It’s too important to put off.