From workers’ compensation insurance to commercial property insurance, business owners must have several types of insurance to cover themselves and their companies. General liability insurance is one type of coverage that doesn’t get talked about as much. So, what is general liability insurance? Keep reading to find out everything you need to know.
What is general liability insurance for small businesses?
Also known as business liability insurance or commercial general liability insurance, this type of policy helps protect your business from claims involving property damage or bodily injury. If an accident occurs on your property, someone can take you to court, or you can be held accountable for any damages or medical bills. So, as the name suggests, general liability insurance ensures you’re not liable for the costs.
Instead of footing the entire bill themselves or risk being sued by a patron, business owners can simply file a general liability claim with their insurance company to have them cover the costs. Keep in mind that your monthly insurance premium will likely go up after you file a claim, but that’s better than paying out of pocket.
What does general liability insurance cover?
Now that we’ve covered the general liability insurance definition, let’s dig in a bit deeper and go over events that can be covered under a general liability insurance policy. These are the broad categories that a general liability insurance policy will cover:
- Bodily injury: If a customer is injured while visiting your business, you could be liable for their medical bills or even be sued by them. General liability insurance protects you from these claims.
- Property damage: You may be legally responsible if a person’s property is damaged while they’re visiting your business. Having a quality general liability insurance policy is your best defense against these cases.
- Copyright infringement: Accidentally using someone else’s work in an advertisement for your business can often lead to a lawsuit. The good news is that your general liability insurance policy can help keep you out of the courtroom.
- Reputational harm: Even if you don’t mean to do it, you can be sued for causing “reputational harm” if you say something that hurts another person’s business. Your general liability insurance policy is your best protection from an unwarranted lawsuit.
- Advertising errors: Like the point above, you may get hit with a defamation lawsuit if you speak ill of other people or businesses in your advertisements. While a general liability insurance policy doesn’t give you free rein to say whatever you want, it can protect you from lawsuits.
What doesn’t general liability insurance cover?
Clearly, it’s important to know what general liability insurance is, but it’s also crucial to understand scenarios that aren’t covered by a general liability insurance policy. These situations must be covered by a different type of insurance plan:
- Employee injuries: When an accident happens and an employee gets injured, a general liability insurance policy won’t cover your business. You’ll need workers’ compensation insurance to help in this situation.
- Auto accidents: Just like how you have auto insurance for your personal vehicle, you’ll need to carry commercial auto insurance for your business fleet. You can also get a hired or non-owned auto insurance policy to cover vehicles you’re renting.
- Professional mistakes: We all make mistakes, but some mistakes can be quite costly depending on the situation. Carrying errors and omissions (E&O) insurance covers you and your business if you make a mistake while on the job.
Does my business need general liability insurance?
Unlike some other types of insurance, general liability insurance isn’t required by law. But when you consider the potential risks of not getting general liability insurance, signing up for a policy is a no-brainer.
If your business has a physical location and if you work directly with customers in that location, you certainly need to have a general liability insurance policy. For example, the last thing you want is for one of your customers to sue you after they slip and fall in your store. In some cases, a single lawsuit can be sufficient to destroy a business—this isn’t a risk you want to take.
Additionally, while running advertisements is a fantastic way to generate new business, you need to be careful to avoid finding yourself in the middle of a lawsuit as the result of an advertising error. It’s all too easy for someone to file a lawsuit against a business for libel, slander, or false advertising. There’s no guarantee that you’d lose your case and be ordered to pay the plaintiff, but a general liability insurance policy is your best protection from any defamation lawsuit.
Is general liability insurance enough?
All businesses are different, and while some companies are fine carrying a standard general liability insurance policy, others will need to expand their coverage. Here are some common instances where business owners should consider paying for a more extensive insurance plan:
- Commercial property insurance: This insurance covers your business property, and carrying it is a good decision for anyone who owns their building or expensive equipment. Some insurance providers let you bundle commercial property insurance with general liability insurance into a business owner’s policy (BOP).
- Cyber liability insurance: If your business accepts credit cards or handles sensitive customer information, the threat of a cyberattack or data breach should always be on your mind. Carrying cyber liability insurance is the best way to protect your business from a lawsuit if there is a data breach.
- Product liability insurance: There’s a good chance you’ll be sued if a product your business makes or sells injures someone or causes property damage. Your general liability insurance won’t protect you in this situation, so you’ll need to add on product liability insurance to protect your company.
- Liquor liability insurance: Carrying liquor liability insurance is the best way to protect your business from the risk associated with serving alcohol. Unsurprisingly, this insurance is usually required when you apply for a liquor license.
How much does general liability insurance cost?
The good news for anyone worried about the cost of general liability insurance is that the average plan only costs about $40 per month. That said, here are a few factors that can affect how much you pay each month for your general liability insurance:
- Insurance provider: The coverage may be similar, but some insurance providers are bound to charge more than others. It’s understandable that you want to find the best rate, but you should avoid automatically selecting the least expensive option—there may be tradeoffs.
- Business size: Larger businesses have more inherent risks than smaller ones, so insurance providers typically charge a higher monthly premium for companies with bigger commercial spaces and more employees.
- Previous claims: Just like with auto insurance, your monthly general liability insurance premium will increase with each claim you file. Try to avoid needing to file claims, as this can save you money over the long term.
- Deductible: Your deductible is the amount of money you have to pay out of pocket before your insurance kicks in. Plans with higher deductibles typically have lower monthly premiums, but choosing a high-deductible policy isn’t always the best decision.
Do your business banking with NorthOne
Protecting your business requires a lot more than insurance coverage—you also need a strong banking relationship. Whether you’re just getting your business up and running or your company has been a staple in the community for years, NorthOne is committed to making banking as easy as possible. We’re trusted by over 320,000 businesses across the country. Apply online today to see how our small business banking services can help your business thrive.
