General Liability insurance

3 min read

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Managing risk is important whether you’re just starting out or you’ve been open for years. With the right insurance you’ll generate sales and profits and protect your business from legal liability.

What is a general liability policy?

General liability insurance provides coverage for third party liability claims that companies face when they do business. In this case, a third party is an individual or company that is not related to your business.

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What does general liability insurance cover?

A general liability policy covers the following types of risk:

  • Bodily injury: If a customer visits your store or office and slips on a wet floor, you may face a lawsuit to pay for the medical costs.
  • Property damage: If you visit your clients to perform work, and during that visit you damage any of their property, you are liable for the damage. The contractor who damaged wood flooring during a home remodeling project may be sued for property damage. The policy can also cover damage to property (machinery, vehicles, etc.) that is rented to you.
  • Defamation: A false statement presented as a fact that causes injury or damage to the character of a person. An advertising injury is a common defamation issue. If Honda runs an ad falsely stating the Toyotas break down twice as often as Hondas, Toyota may sue for defamation.
  • Copyright infringement: Copyright law protects books, music, films, and other works. If a business uses work under copyright without obtaining permission, the business is infringing on the rights of the copyright holder.
  • Defective products: A business may be sued for selling a product with a design flaw, or a flaw in the manufacturing process. If a customer believes that they were harmed, because a product included insufficient instructions, the buyer may sue. The amount of product liability insurance may vary depending on the potential risk associated with using your products. For example, a clothing store would have significantly less product liability risk than an appliance store. The number of employees you manage will also impact the business risk you face.

What does general liability not cover?

A general liability insurance policy does not cover business property damage (damage to your firm’s property), or protect you against claims of negligence. If your state requires you to carry workers’ compensation insurance, you must buy a separate policy. Fortunately, a BOP policy also provides commercial property insurance.

Who needs a general liability policy?

If you’re a business of any size, you face liability risks. According to insurance company Insureon (who reference statistics from The Hartford) the average costs of legal liability claims filed by small businesses are:

  1. Reputational harm: $50,000
  2. Product liability: $35,000
  3. Personal injury or property damage: $30,000
  4. Customer slip and fall: $20,000

General liability policies can be tailored to fit the needs of your small business, and the types of risks your company faces. If you have the right insurance, you can help protect yourself from the risk of lawsuits and maintain business operations.

The annual cost of a general liability policy is far less than the claims listed above.

How much does general liability insurance cost?

According to Insureon, the median annual cost of general liability insurance is $500.

“Most small business owners (48%) pay between $300 and $600 for their policies, and 17% pay less than $300. These figures were derived from an analysis of thousands of insurance policies purchased by Insureon small business customers.”

Your insurance company may bundle a general liability policy with commercial property insurance to create a business owners policy (BOP). A BOP is sold at a discounted rate, and it’s an easy way to reduce the price of both forms of protection. 

You may need other types of coverage that are not specifically addressed by a general liability policy. Additional types of insurance include:

  • Director and officer insurance: This coverage protects company directors and officers if they are sued based on a particular management decision.
  • Cyber liability insurance: A policy that protects your firm in the event of a data breach and your customer(s) data is stolen.
  • Employer practices liability insurance (EPLI): This policy covers legal defense costs for employment-related lawsuits, including wrongful termination and sexual harassment.

Once you address general liability, look into these other forms of insurance protection:

Commercial property insurance

Property insurance protects your business property, including real estate, equipment, inventory, and machinery. It also addresses the risk of loss due to vandalism, fire, and other types of natural disasters. Your property coverage should cover the cost of repairing or replacing property, so you can operate your business.

Commercial property insurance may not include certain types of natural disasters. For example, if you’re in a region where flooding is common, flood insurance may not be included in your property policy. You should also have small business insurance for leased property.

Professional liability insurance

Also known as errors and omissions insurance, professional liability insurance is designed to help protect professionals and service-oriented businesses when mistakes happen. 

The policy protects doctors, lawyers and other professionals, who provide advice from the cost of negligence claims. Some professionals are required to carry this insurance—physicians are required to purchase malpractice insurance in most states.

Home-based business insurance

A growing percentage of business owners work from home. You can purchase insurance to cover home-based business needs.

Home-based business owners commonly assume that homeowner’s insurance will cover some degree of their business liability. Some homeowner’s policies offer riders in addition to regular home insurance, but these only go so far. An owner may consider purchasing additional insurance to cover general and professional liability risks, and the potential for loss of business income if the home office is damaged.

Workers’ compensation insurance

If you employ workers, most states require that you carry workers’ compensation insurance, which is a form of disability insurance. If an employee is injured on the job, the policy pays for medical costs and loss of wages. Your worker’s comp premiums are based on the number of employees and the type of business you operate. For example, employees at construction firms have a higher risk of injury on the job than an office worker. As a result, the construction firm will pay more in premiums.

You may need insurance to cover financial losses incurred while your facilities are closed, or being restructured after a disaster.

Business interruption insurance

The policy can pay for a temporary business location so you can restart operations after an event that prevents you from serving customers. This coverage is useful for retailers, manufacturers, and other businesses. It’s important to know your coverage may not start for 48 to 72 hours after the event, and that your policy will have a time limit.

Where do you go from here?

Talk with an insurance agent to determine the types of insurance coverage you need for your business, and schedule a review of your policies each year. QuickBooks Insurance partnered with multiple organizations to make sure your business has the right coverage at the right price. Contact QuickBooks Insurance to obtain free quotes, so you can confidently manage your business.

Insurance tailored for your business, at a price you can afford.