General liability insurance is an important part of any business’s risk management. It’s required for some contracts and lease agreements, and it can help you protect yourself against the costs of a lawsuit.
There are several types of general liability insurance, each with its coverage limits and exclusions. Read on to learn more about these options, and how to choose the best one for your business.
1. General Liability Coverage
Whether you’re a business owner or a contractor, general liability insurance is a necessary part of your small-business safety kit. Not only does it protect your company from lawsuits that could bankrupt you, but it also covers the costs of legal settlements and judgments that may be awarded to people who are injured or have property damage caused by your business.
All major business insurance providers sell general liability coverage, both as a standalone policy or bundled in business owners’ policies (BOP). NerdWallet recommends getting quotes from several different providers so you can find the best fit for your needs at the lowest possible price.
While general liability is the most common form of business insurance, it doesn’t cover all potential claims. You’ll want to consider Errors and Omissions or Professional Liability insurance as additional protection.
General liability insurance isn’t mandatory by law, but the business that hired you as a contractor or your clients might insist that you have it before they work with you. And your landlord or tenant might require it as a condition of leasing your space.
2. Professional Liability Coverage
If you provide professional services, such as accounting or legal advice, you may need to purchase a separate policy that covers claims made by clients who claim that you have acted negligently or violated their rights. This coverage is called professional liability insurance (PL).
PL policies are often paired with general liability policies for more complete protection. If your business has a single location where you provide service to clients, then you might not need to buy both types of policies.
The cost of a PL policy varies depending on several factors, including the type of business you own and your industry. It can also be influenced by taking steps to minimize risks in your business, such as background checks for employees and safety training.
In addition to helping your business avoid claims, PL coverage also protects you from the cost of paying out any judgments. This can help you pay for attorney fees and court costs, as well as any other associated losses.
If you have a PL policy, it is important to tender the policy promptly so that your business receives the benefits of the policy. Failure to do so can result in your insurer denying the claim or seeking a higher deductible.
3. Employer’s Liability Coverage
A business can be sued for many different things, and general liability insurance can protect your business from a variety of lawsuits. These include claims of bodily injury, property damage, or professional services mistakes.
The coverage can also help your business avoid expensive legal defense costs and potential settlements or judgments if your business is sued. It can also provide financial restitution if someone is injured on your business’s premises.
Most businesses that don’t have workers’ comp coverage should consider buying employer’s liability insurance, often referred to as “stop-gap” coverage. This is because it bridges the gap between the workers’ comp policy and the general liability coverage your business needs to defend itself from a lawsuit.
Typically, an employer’s liability policy is sold as part of a package with workers’ compensation insurance. However, some insurers offer this coverage as a standalone policy.
This type of coverage can be very valuable, especially if your business is a high-risk industry like construction. It can also help protect your company from a wide range of situations, including damages to customers’ personal property, claims of a damaged reputation, or copyright infringement.
4. Property Damage Coverage
General liability insurance protects you from a variety of claims — including bodily injury and property damage — that may be brought against your business. It also covers medical costs and legal expenses if someone sues you for libel or slander.
Bodily injury is the most common claim that general liability protects you from. It could happen when a customer slips and falls on your floor or walks into your building while visiting.
Property damage is another common claim, and it relates to the harm or damage to your client’s or customer’s property. For example, if you’re a carpet cleaner and accidentally knock over a lamp, your customer may sue you for the cost of replacing it.
Property damage liability insurance pays for repairs or replacements of damaged items, such as a car or apartment building. This coverage usually has a limit, which is the maximum amount that your policy will pay out in a claim.
5. Cyber Liability Coverage
A business that stores sensitive customer data online, like credit card numbers or Social Security numbers, should consider cyber liability insurance. This type of coverage can help pay legal fees, notify affected customers, and provide credit monitoring services.
While cyber-attacks are becoming more common, they can be devastating to a business’s finances and reputation. These attacks can lead to a company losing valuable customer relationships and hefty fines.
This is why many businesses are turning to cyber insurance to address these risks. Unlike other types of insurance, cyber insurance lacks years of actuarial data that helps companies balance pricing and risk.
However, a growing number of cyber insurance policies offer flexible options and include add-ons that increase protection for your company. Some even include a claims hotline with access to relevant vendors.
Some cyber liability policies also contain a deductible, which is the amount of money you must pay out of pocket to receive payment after a cybersecurity incident. The deductible is based on your industry and the risk factors in your organization.
6. Business Auto Coverage
A business auto policy covers the cars, trucks, and vans that you use in your business. It also protects you from liability if someone gets hurt or their property is damaged in an accident involving one of your vehicles.
A commercial vehicle policy differs from a personal automobile insurance policy in that it includes broader coverage and higher limits. This is because the company’s vehicles have a higher level of risk and replacement cost than your vehicle.
In most states, you must carry a minimum amount of liability insurance for each vehicle owned by your business. It’s also important to have medical payments, and uninsured motorist and underinsured motorist coverage.
Many businesses have employees who drive their private vehicles for work purposes. This is why it’s crucial to list all of your employees who may be driving the company’s vehicles. This information allows the insurance company to assess the risk and underwrite accordingly.
A standard form for this type of coverage is called a business auto coverage form (BACF). It lists the types of vehicles insured, the causes and types of damages covered, and the obligations of the insurer and the business. It can be supplemented with broadening endorsements to extend coverage.
7. Business Owner’s Policy (BOP)
General liability insurance protects your business from claims made by other people. It can help pay for medical bills, lawsuits, and other losses resulting from property damage.
The cost of general liability insurance varies based on the size of your business, your industry, and your location. You can manage your costs by choosing the amount of coverage that best meets your needs.
A business owner’s policy is a popular way to get a broad range of protection for your business in one convenient package. It typically includes general liability, property, commercial auto, business interruption, and workers’ compensation insurance.
Often, these policies are less expensive than buying individual coverages. You can start with a basic BOP and later add additional coverages, as needed.
The property portion of a BOP covers your business’s buildings, equipment, and inventory, including items that are not yours but were in your care. It also helps pay for loss of income and expenses while your business is being repaired following a covered property loss.
Whether you work as a contractor, own a business, or run a freelance job, general liability insurance is essential for protecting your bottom line. It shields you from costs associated with claims of property damage, personal injury, or wrongful termination resulting from an accident at your place of business.
A reputable insurance provider will be able to help you determine the amount of coverage you need. It also can offer advice about the best ways to lower your premium.
Another factor that affects your policy cost is the deductible you choose. This is the amount you pay out of pocket before your insurance company pays out for covered losses.
It’s important to review your deductible regularly and update it when necessary. This helps to ensure you’re not overpaying on your insurance, said Ted Devine, CEO of online small business insurer Insureon.
Other important aspects of your insurance policy are its limitations and exclusions. These exclusions can limit the types of losses you can claim and what they cover, said Myles Gibbons, president of select accounts at insurance provider Travelers.