General Liability Insurance is considered the cornerstone of all insurance coverages needed by a small business. It is the basis of what other coverages are built on and should be the first coverage considered for your protection. Whether your business is a one-person operation, Mom and Pop, or an established corporation with 50 employees, General Liability should always be included in your insurance portfolio.
Your general liability is what will financially protect your business in the event that you or your employees cause bodily injury or property damage to a third-party (customer). Typically known as “slip and fall” insurance, your general liability coverage goes much further in the event of a loss (claim). Every General Liability policy consists of a core group of coverages, but can be endorsed (added to) to design an insurance solution that will meet the needs of your particular type of business.
What is Covered under General Liability Insurance?
Bodily Injury Liability
This coverage pays when you are found liable for injuries to a third party as a result of your business activities.
For example, an employee of your flower shop is watering plants within the store and gets the floor wet. If a customer walks by and slips and falls because of the wet floor, your general liability would pay if an action is brought against you. Your insurance would pay for settlement costs or a judgment awarded by the court.
Property Damage Liability
The property damage coverage in your general liability policy pays for damages you or your employees cause to third party as a result of your business activities.
As an example, consider a roofing business that is repairing an area of a roof damaged by a fire. While your employee is on the roof of a customer’s home, a large piece of equipment slides off the roof and goes through the roof of your customer’s luxury convertible. Rather than having to pay out-of-pocket to repair the car, your property damage coverage would reimburse your customer for repairs to their vehicle.
Personal and Advertising Injury Liability
Personal and Advertising Injury is not about injuries to a person. This policy provides coverage if you or your employees cause a financial loss as a result of your advertising efforts. Personal and Advertising Injury applies if your business is found liable for financial loss to a third party (your customer) because of slander, libel, copyright infringement, or invasion of privacy.
Medical Payments coverage provides coverage for injuries to a third party at your business location or any other location where you or your employees are conducting business activities. The medical payments coverage differs from bodily injury liability because proof of liability is not required. Typically this coverage will pay in the event of a non-serious injury and funds will be distributed quickly without the need for a lawsuit.
One of the greatest expenses associated with a lawsuit is the cost of your legal defense. Every action brought against your business must be responded to by legal counsel even if it appears to be frivolous and without merit. Your general liability insurance provides for legal counsel that is assigned by and paid for by your insurer.
Optional Coverages (Endorsements)
Many insurance carriers will allow the policyholder to add optional coverages to the basic general liability policy that are normally excluded in order to deliver a more comprehensive insurance solution.
- Liquor Liability endorsement
- Employment Practices Liability endorsement
- Manufacturers and contractors liability
How Much Does General Liability Insurance Cost?
The cost for General Liability insurance averages $500-$600 and is always determined by the amount of risk exposure (what can go wrong) being accepted by the insurer. For example, a home contractor is going to pay significantly more than an accountant because of the risk associated with each industry. Although there are many exposures that affect the price of a policy, insurers are typically most concerned about the following:
- The industry you are working in, such as contractors, service, hospitality, retail, or professional.
- Years in business.
- Number of customers.
- Annual revenue.
- History of claims.
Your cost for General Liability insurance is going to be determined by your answers to several underwriting questions, many which are listed above. To provide a price indication by industry, you can consider the following amounts as a basis for a $1 million General Liability policy:
- Hair Salon/Barber Shop: $450 annually
- Cable/Satellite Dish Installer: $550 annually
- Small Retail Store: $750 annually
- Computer Repair Service: $400 annually
As you may have noticed, the most expensive policy is for the retail store. This is primarily because retail stores have a continuous flow of traffic coming in and out each day which translates into a higher exposure than the other industries listed.
Although the general liability policy is considered the foundation of small business insurance, it is a limited policy and there are many risks that are not covered. Some of the other policies that should be considered by every business owner are:
- Workers’ Compensation: If you have at least one employee, your business is responsible to pay for the costs associated with an injury or illness that is work related.
- Professional Liability: If you are a professional in your industry or required to be licensed to operate, your general liability will not pay for losses associated with your professional services to a customer.
- Commercial Auto: Most personal auto policies exclude coverage on vehicles while they are being used for business. Commercial auto insurance will provide liability and physical damage coverage for your business vehicles.
- Inland Marine: Contractors operating with only general liability insurance do not have coverage for tools and equipment without an Inland Marine policy.
- Cyber Liability: Every business today is connected to the internet for at least some part of the work week. Data breaches have become common and are very expensive for any victimized business. In today’s technological environment, it’s no longer a matter of IF you suffer a data breach, but WHEN you suffer a data breach.
For most consumers, commercial insurance is a confusing and even intimidating product that must be dealt with in order to operate your business safely. If you are unsure of your options and are looking for advice, contact an insurance professional who can provide you with the information you need to make an informed decision about transferring your everyday risks to a highly rated insurance company.