General liability insurance provides financial security to your business in the event of third-party bodily injury or property damage claims resulting from your products, services, and operations. It may also cover expenses if someone asserts copyright infringement, libel, or slander against you.
General liability insurance can be acquired as either a stand-alone policy or as part of either a Business Owners Policy (BOP) or Commercial Package Policy (CPP). The cost of general liability insurance varies based on your business’ size, industry, and location.
1. Bodily Injury
General liability insurance, also referred to as commercial general liability or business liability insurance, is a type of policy that safeguards your company against claims for bodily injury and property damage caused by third parties such as customers, clients, or vendors. It provides coverage in the event of an attack from an uninsured motorist on your premises.
Bodily injury coverage provides medical expenses and legal fees for people injured in an accident that you are found at fault. It may also cover the plaintiff’s property damage, such as repair or replacement costs for damaged items.
Your bodily injury coverage limit is the amount your insurer will pay for any covered claim per person or accident, up to a specified maximum. A higher bodily injury limit gives you more protection at lower costs.
Commercial umbrella policies are separate policies that increase the limits of your general liability insurance, employer’s liability insurance, or commercial car insurance. They offer extra coverage in case an accident impacts your business and any medical expenses or legal fees exceed what these underlying policies cover.
2. Property Damage
General liability insurance is essential for all business owners. It shields you against third-party claims of bodily injury or property damage, and can even cover legal expenses if someone sues you for libel or slander.
Property damage can be caused by a variety of reasons, such as accidents, weather events, and natural disasters. Even minor mishaps can cost you thousands in repairs and replacements.
An example is when someone else damages your vehicle and files a claim with your insurer. Your insurer will cover any expenses to repair or replace the car as long as it wasn’t your fault for the incident.
Preventing property damage is the best way to minimize it. This involves making sure your equipment is secure, teaching employees to be cautious, and following appropriate safety protocols.
No matter your industry – construction worker, dog trainer, or piano tuner – a property damage claim can put your business into dire financial straits. General liability coverage is essential to protect your bottom line and get you back up and running quickly after an accident. Plus, any premiums paid can be written off at tax time as tax deductions.
3. Advertising Injury
General liability insurance safeguards your business against financial losses caused by third-party claims. It covers legal costs and other expenses to defend you and your business against such matters as bodily injury, property damage, personal injury, advertising injury, and more.
General liability insurance protects from accidents and negligence, as well as intentional acts. This coverage, known as Personal and Advertising Injury or Coverage B, compensate damages caused by libel, slander, invasion of privacy, disparagement of goods, copyright infringement, misappropriation of trade secrets, and other offenses listed.
Libel or slander claims can be a serious business risk, as they can harm your reputation and lead to the loss of customers and profits. Libel and slander cases tend to be difficult to prove, so having insurance may help cover legal fees associated with defending yourself.
Advertising injury coverage is an integral component of commercial general liability insurance, protecting your business from claims resulting from alleged offenses that take place during advertising. Such offenses include libel, slander, right infringement, disparagement of goods, and copyright and trademark infringement.
4. Products Liability
Product liability insurance coverage is an extension of general liability policies that cover claims against businesses related to their products. It shields manufacturers, distributors, retailers, and advertisers from lawsuits claiming damage or injury caused by these items.
Suing a business for products can cost millions in settlements, legal fees, and medical bills. Not only that but being sued can ruin your company’s reputation and result in the loss of clients, landlords, or marketplace contracts.
Your business’ level of risk can determine how much product liability insurance you need. Typically, larger firms with more revenue and higher manufacturing costs require greater protection.
When creating your product liability limits, you should take into account both the products sold and how many people are exposed to them during production. High-risk items require higher limits due to their potential for bodily injury or property damage.
Maintain a comprehensive policy to guarantee all products are covered. Some policies have restrictions on what can be covered, so make sure to understand what is covered and keep an eye out for any new items your business may add in the future.
5. Medical Payments
General liability insurance is an essential component of any business policy. It shields you from legal claims and other costs in the event someone sues your business for bodily injury or property damage.
Protection pays for medical expenses incurred by others who are injured on your premises, regardless of who was at fault. It usually covers a range of small expenses like X-rays, ambulance rides, medication, and deductibles.
Health insurance may be especially useful in cases where injuries caused by an auto accident are not covered by your regular policy.
Liability coverage is more comprehensive than medical payments, including major medical procedures, legal expenses, and settlement fees in case the claim escalates into a lawsuit.
Generally, it’s wise to carry the highest liability limit offered by your insurer. That way, you have maximum protection in case a guest gets hurt on your premises and decides to file a liability claim against you.
6. Errors and Omissions
Errors and Omissions (E&O) coverage safeguards your business against financial losses caused by errors made by employees or clients. It also pays legal fees and settlements up to the limits of your policy, regardless of who made the mistake.
Professional errors are unfortunately all too common — from accountants who give bad advice to consultants offering subpar services. Without specialized coverage, these oversights could cost your business thousands of dollars in litigation, rework costs, or compensation that would quickly drain away funds from your account.
Professionals in industries such as insurance, investment, real estate, accounting, and law require E&O coverage to protect them against liabilities. Some state laws, licensing boards, and contracts with clients require professionals to have an E&O policy.
Small business insurance providers present beneficial coverage options that help in your ability to recoup from professional mistakes. Errors and omissions coverage is especially crucial for businesses that provide services at a fee, such as lawyers, doctors, and architects.
7. Business Interruption
If a business is unable to operate due to an incident such as a fire or flood, business interruption coverage can provide income losses. Usually included in a company’s commercial property insurance policy, this type of cover pays the business’ operating expenses while it remains closed due to a covered loss.
These can include rent or lease payments, loan payments, employee wages, and taxes. Relocation expenses are also included if the business must temporarily move elsewhere due to physical damages.
It is essential to note that business interruption coverage does not automatically include third-party liability or negligence claims. In these instances, the policy will pay for medical expenses, settlements, and legal fees up to the limits of your policy.
A business interruption policy typically begins to kick in 48 to 72 hours after your business has closed, and can extend up to one year depending on the policy. You may even have the option to purchase extra expenses coverage which would cover relocation expenses, rent, and equipment rental if necessary.
Most business interruption policies do not cover loss caused by a virus like the COVID-19 pandemic. This issue is still being debated, and many insurers will likely review their policies in the future to clarify coverage for this unique event.
8. The Conclusion of General Liability Insurance
is a critical decision for all contractors, handymen, plumbers, and construction companies as it safeguards their businesses from legal disputes that may arise due to third-party damages or client-related claims. These mishaps could pierce a deep hole in the business’s pocket and can also ruin the business rapport between clients and the company itself.