There are almost 30 million small businesses in the US today, and 44% of them don’t have insurance. Now make a random guess: how much does litigation cost an average business? The US Chamber of Institute for Legal Reform reports more than $100 billion each year.
If your business were one of these businesses, you’d be wishing for Aladin’s lamp to save yourself from those expenses. I don’t know about magic, but a general liability coverage policy can help you out for sure.
What is a General Liability Insurance?
General liability coverage is an insurance policy that protects businesses against claims that can arise in the course of normal business operations. It is a type of commercial insurance policy that protects third party bodily injury, damage to property, or personal injury.
General Liability Policy Coverages
- Third-party bodily injury and property damage – caused during the operation of your business.
- Reputational harm – caused to someone due to malicious prosecution, wrongful eviction, privacy violation, slander, libel, and more.
- Advertising damages – copyright infringement while running business ads.
- Medical costs – incurred if a customer hurts themselves while visiting your business.
- Damages – caused by fire, lightning strike, or explosion to a rented property.
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Who needs general liability insurance?
Most businesses can benefit from general liability insurance. However, this policy is primarily for companies that:
- Operate in a location that is open and easily accessible to the public
- Interact with its customers on the job site
- Use or handle the client’s property
- Run business in a rented space
- Frequently advertise their products and services
- Have an internet presence
- Use social media for reaching their market or run ads
What are the costliest claims among small businesses?
As mentioned before, almost every business needs some form of general liability insurance. However, the cost of different claims can vary. The most costly property and general liability claims for small businesses are:
- Reputational harm – $50,000
- Vehicle accident – $45,000
- Fire damage – $35,000
- Product liability – $35,000
- Customer injury or damage – $30,000
Along with this, 35% of all general liability claims result in a lawsuit. The average claim of a lawsuit can exceed $75,000 to defend and settle.
Lawsuits and property damages can occur anytime, and businesses would not be expecting them. Moreover, it might not be possible for companies to own all the property they use; hence, they rent. They must also deal with customer’s issues now and then, where customers might get hurt.
Basic math is enough to understand that the probability of some of these incidents happening is high. Paying out of pockets can get costly in any of these situations. So, for 100% safety for your business, you should be willing to compromise a 10-15% of insurance expense.
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General liability exclusions
General liability insurance does not cover the following:
- Professional errors
The insurance excludes errors and omissions like professional mistakes, undelivered services, and missed deadlines. Professional indemnity insurance (popularly known as errors and omissions insurance) covers these kinds of claims.
- Employee discrimination lawsuits
General liability insurance does not cover expenses related to claims of discrimination, harassment, and wrongful termination. For such claims, you will need employment practices liability insurance.
3. Employee injuries
This insurance policy doesn’t include coverage medical expenses for injuries and lost wages for employees due to accidents within the business by their staff. For this type of damage, you will need a separate worker’s compensation policy.
4. Vehicles used/ owned/ rented by a business
General liability insurance doesn’t cover bodily or property damages caused while using vehicles used by the company or leased and rented car. Commercial auto insurance can cover this kind of damage costs.
- Damage to business property
The policy also doesn’t include the cost associated with repairing or replacing business property damaged by fire or weather events or replacing stolen business property. Commercial property insurance can cover this kind of damage costs.
- Damage during construction works
The insurance coverage excludes work-related accidents during repair or maintenance of plumbing, electricity, heating & air, floor installation, etc. You will need a general contractor insurance policy to cover such claims.
Nonetheless, you can add any of these as endorsements to general liability coverage if your business is highly susceptible to certain risks.
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General Liability Coverage Cost
You may want to compare prices for insurance policies and premiums with similar businesses. However, premiums will differ according to your insurance needs. This difference in cost depends on multiple factors, such as:
- Type of business
- Industry and risk factors
- Location and size of the business
- Building condition
- Types of properties used in business
- Coverage limits
- Number of employees
- Frequency of contact with customers
- Years of experience
- Insurance claims history
I hope this comprehensive guide to general liability coverage insurance has made you aware of what you need to ask your insurance agent about your commercial insurance. Insurance agents seek for commercial clients because their insurance needs are usually more extensive than clients in the personal lines. Your insurance agent must be able to explain your coverage details and their limits. An independent insurance agent in commercial lines will have more knowledge to help you get the best possible coverage that secures them as well as their business.
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