What Is General Liability?
General liability insurance, often referred to as commercial general liability (CGL), is a type of insurance policy that offers protection against a wide range of risks businesses face on a daily basis. These risks include third-party bodily injuries, property damage, personal injury, and advertising injury. Essentially, it covers claims that could otherwise result in costly legal battles or significant out-of-pocket expenses.
This coverage is typically one of the foundational policies for any business insurance package and is often required when signing contracts with clients or landlords.
Why Is General Liability Important?
Business operations—regardless of the industry—are never free of risk. Accidents can happen anytime, and when they do, the financial repercussions can be severe. General liability insurance ensures that your business isn't left vulnerable to lawsuits or expensive claims that could derail your growth or even shut down your company.
For example, imagine a customer slips and falls in your store, injuring themselves. Without general liability coverage, your business would be responsible for covering their medical expenses, any potential legal fees, and damages awarded by the court. However, with general liability insurance, these costs would be covered under your policy, helping you maintain financial stability.
What Does General Liability Insurance Cover?
A general liability policy typically includes coverage for:
Bodily Injury: Covers medical costs, legal fees, and damages if someone is injured on your business premises or as a result of your operations.
Property Damage: Covers the cost of repairing or replacing property that your business damages.
Personal and Advertising Injury: Includes protection from claims such as slander, libel, copyright infringement, and false advertising.
Legal Defense and Court Costs: Covers the cost of defending your business in court, even if the lawsuit is groundless.
What Is Not Covered by General Liability?
It's important to understand that general liability insurance does not cover everything. Exclusions typically include:
Employee Injuries: These are covered under workers' compensation insurance.
Professional Errors: For this, businesses need professional liability (errors and omissions) insurance.
Intentional Acts: Claims arising from intentional wrongdoing are not covered.
Auto Accidents: Commercial auto insurance is required for this type of risk.
Damage to Your Own Property: Business property insurance is needed to cover this.
Who Needs General Liability Insurance?
Nearly every business can benefit from general liability coverage. Industries where it's particularly critical include:
Retail and hospitality businesses, which interact directly with customers on-site.
Construction companies and contractors, where physical labor and the use of tools create additional risk.
Service providers, such as consultants, marketers, and IT firms, who may face advertising injury claims.
Manufacturers and distributors, due to potential claims from defective products.
Even home-based businesses aren’t immune to liability risks and should consider purchasing general liability insurance if they regularly interact with clients, ship products, or work with third-party vendors.
How Much Does General Liability Insurance Cost?
The cost of general liability insurance varies depending on several factors, such as:
Industry and type of business
Business size and annual revenue
Number of employees
Location
Claims history
Coverage limits and deductibles
On average, small businesses might pay anywhere from $400 to $1,500 per year for a standard general liability policy. Larger businesses or those in high-risk industries will typically pay more.
How to Choose the Right General Liability Policy
When selecting a general liability policy, it’s important to:
Assess Your Risk: Understand the unique risks associated with your business.
Compare Providers: Shop around to compare coverage options, customer reviews, and pricing.
Understand Policy Limits: Ensure your coverage limits are sufficient for the risks you face.
Review the Fine Print: Be clear about what is and isn't covered to avoid surprises down the road.
Working with an insurance agent or broker can help you navigate the complexities of general liability insurance and ensure you're adequately protected.
Final Thoughts
In today’s litigious business environment, operating without general liability insurance is a major risk. It not only offers peace of mind but also serves as a crucial shield against unexpected claims that can disrupt your operations or impact your bottom line. Whether you're just starting out or have been in business for years, investing in a general liability policy is a smart, strategic move for long-term success and security.
