As a business owner, you may be concerned about understanding the benefits of having a properly planned and executed insurance portfolio and the risks of not having one. You may also have concerns about the options available and how much the costs of buying and administering insurance can be.
Who Needs General Liability Insurance?
General Liability Insurance is not required by state law but without General Liability Insurance, you may be forced to pay the potentially ruinous costs of common liability claims. Also, if you plan on contracting work from larger companies, it is very likely they will require you to have this coverage and show proof of insurance. Lots of large companies insist that hired vendors and contractors have General Liability Insurance. This way, the hiring company can be assured that the contractor can survive a liability claim and continue to meet their contract obligations.
Consider buying General Liability Insurance if you:
- Have a store, office or building that’s open to the public, clients, and vendors.
- Handle or work on or near client property.
- Advertise or do marketing for your business.
- Have a social media presence, or use social media both personally and professionally.
What Does General Liability Insurance Cover?
General Liability Insurance helps cover the costs of liability claims made against your business for third party personal injury, third party property damage and advertising injury. For example, if a customer slips and falls at your place of business, they could make a claim against your company. Did you know that the average cost of a slip and fall claim is $20,000?2 Without General Liability Insurance, your company may have to pay all the costs related to settling such a claim from your own business and personal assets.
- Costs related to property damage claims made against your business.
- Expenses to settle claims by a third party that your business caused them personal injury.
- Advertising injury claims made against your business.
- Attorney fees related to settling covered claims.
- Administrative costs to handle covered claims.
- Court costs associated with covered claims.
- Settlements and judgments for covered claims.
General Liability usually does not cover:
- Costs of damage to your own business property.
- Costs of personal injury claims made by your own employees due to work related incidents.
- Costs of auto accidents caused by you or your employees while driving for work purposes.
- Purposefully illegal or malicious acts.
Judgments, settlements, lawyer and court fees can be extremely expensive. You may need to spend several thousand dollars even if the claim made against you doesn’t go to court. You’ll probably need legal counsel on how to respond to a claim. Lawyers typically charge in the range of $100-$200 an hour.4 If the claim goes to court, those costs could easily exceed $100,000.5
You also need to factor in the cost of administrative work done by legal secretaries and other attorneys handling your claim. Add in the cost of the settlement or judgment and you may be looking at up to hundreds of thousands of dollars. Few businesses can survive such a blow on their own. Fortunately, the right General Liability Insurance policy can help cover most of these costs.
A General Liability Policy for Your Business May Cover the Following Claims
Third-Party Bodily Injury. A person may make a bodily injury claim against your business if he injures himself on your business property. For example, a customer is walking through your accounting office and trips over an extension cord. He falls and breaks his arm. The customer could make a claim against your business for bodily injury. General Liability Insurance for businesses can help cover the costs of this claim.
Third-Party Property Damage. General Liability Insurance can help cover the costs of damage your business causes to another person’s property. For example, a landscaping business is removing tree stumps on a customer’s property. One of the tree stumps rolls down the customer’s yard and into their neighbors’ hot tub. This causes over $1000 worth of damage to the hot tub. The neighbor makes a claim against the landscaping business for property damage. Workers Compensation Insurance in Long Beach can help cover the costs of this claim.
Advertising Injury. General Liability can help cover the costs of claims made against your business for advertising injury. For example, one of your ads has music playing in the background. The artist who owns the rights to that music makes a claim against your business for copyright infringement. General Liability Insurance can help cover the costs of the claim made against your business.
Reputation Harm. Other businesses may claim that things you say or advertisements you run have harmed their business’s reputation. For example, you’re asked what you think of your competitor’s products in an interview. You give your honest opinion and explain how your products differ and are superior in some ways. The competing business hears this and claims that you’ve harmed their reputation. General Liability Insurance for businesses can help cover the costs of a claim like this.
What General Liability Insurance Does Not Cover
- Commercial Auto Accidents, this is covered under a Commercial Auto policy
- Employee Injury or Illness, this is covered under a Workers Compensation policy
- Property Damage to your own property, this is covered under a Commercial Property or Inland Marine policy
- Errors or Omissions. Clients and customers can make claims that your business committed errors in providing your professional services. For example, a marketing agency is consulting its small business customer on a new marketing campaign. The small business launches the marketing campaign and immediately begins to lose customers. The small business customer then makes a claim against the marketing agency, stating that their services cost them to lose valuable business income.
General Liability Insurance does not cover a claim like this. Professional Liability Insurance, also known as Errors and Omissions Insurance, is designed to help cover claims like this.
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