The Truth About General Liability Insurance
What’s the truth about general liability insurance?
Most people think they don’t need it, but they probably do.
Read on to find out what general liability insurance covers and why you need it, especially if you own your own business or work in a company with multiple employees.
What Is General Liability Insurance?
A commercial general liability insurance policy (GLI) is designed to protect you if a third party files a lawsuit against your business.
This coverage, which protects you from financial loss and legal liability, may include defense costs in case of suit and damage awards or settlements.
general liability insurance policies typically cover these six types of losses:
- bodily injury or property damage,
- medical payments, and other covered liability losses;
- contractual liability,
- personal injury protection;
- products-completed operations hazard insurance,
- and non-owned automobiles.
Policies also often offer extra coverage for things like computer data and employee dishonesty.
In order to obtain a general liability insurance quote, there are several factors that affect your premiums such as where you’re located geographically, what kind of product or service you provide, and how much money you make each year.
The amount of money at risk also affects your premiums because higher amounts equal higher premiums.
What Does General Liability Insurance Cover?
General liability insurance, also known as GLI, protects your business from certain types of lawsuits. It helps cover legal costs should someone accuse you of causing a mishap or injury.
General liability is usually part of a commercial umbrella policy, which can be particularly useful in protecting your business. These policies may also include product liability coverage, which can protect you if someone sues over injuries caused by a product you sell or distribute.
If you’re in an industry that has an increased likelihood of generating such claims—such as construction or manufacturing—this type of coverage might be even more critical to your business’s health and general liability insurance costs.
In some cases, general liability insurance costs could go up substantially depending on how much protection you decide to purchase.
Your premium will depend on many factors including The size of your company and its history of filing claims; The number of employees; How much money is at risk; And whether there are other factors involved (like location).
In general, larger companies tend to pay higher premiums than smaller ones do.
General liability insurance rates are often calculated using a per occurrence rate structure with lower limits per claim than on property damage coverage.
Property damage rates are often based on each occurrence with higher limits per claim but lower overall premiums due to fewer occurrences expected during any given year.
Why Do I Need General Liability Insurance?
General liability insurance coverage, also known as GLI, is an essential part of any business. GLI helps protect your business from claims of negligence brought by others.
This coverage will help cover such issues as slip and fall accidents on your property or injuries sustained by visitors at your location.
It’s important to note that GLI differs from other types of business insurance in that it covers potential legal issues rather than acts of nature, like a fire or hurricane damage.
If you are still unsure why you need general liability insurance coverage, consider these scenarios:
You own a local convenience store where people often spill coffee while shopping.
If they slip and fall due to your untidy flooring,
are you liable for damages?
What if someone experiences injury when visiting your site due to a lack of clear safety signs?
In both cases, there could be legal ramifications should you not have covered yourself adequately with general liability insurance coverage.
What Are the Typical Limits For General Liability Insurance?
Business liability insurance (GLI) can help cover claims that your business ... management, Professional liability insurance, and property damage.
Your GLI will also be contingent, meaning it’s only valid if you have at least $500,000 in commercial auto insurance.
So what's typical?
Well, many business owners think they need coverage limits of $2 million or more to protect them against losses.
That's a great goal to work toward, but your current needs may not warrant that much protection. You don't want to buy more coverage than you need just because you can afford it.
Excess coverage increases costs without increasing protection and can lead to underinsurance and disaster if an accident happens during a period when your policy is underfunded.
The truth is, most businesses do not need $2 million worth of insurance protection; they usually only require between $100,000 and $300,000.
The good news:
If you are currently underinsured, there are ways to add additional insurance capacity without taking on too much risk. One way to do so is by purchasing umbrella insurance.
A personal umbrella policy can offer up to another $1 million in liability coverage for a relatively low cost—usually less than 10 percent of your existing insurance premium.
It kicks in after all other policies are exhausted, which means it protects assets that would otherwise be exposed after a catastrophic loss.
Another option is known as excess/excess coverage, which provides up to two times your existing limit for a small additional premium.
Other Types Of Business Liability Coverage
There are two main types of business liability coverage that you can opt for, although some insurance companies may offer both.
You’ll want to ask about them so you can find out which one is right for your small business:
- Management liability insurance
- Commercial property insurance
The differences between these policies mainly hinge on when they kick in.
This can be a major point of contention, as Business Owner’s Policies will often only cover you while employees are present, while other options will provide protection 24/7.
If you run an online business, however, it’s important to note that commercial property insurance will not cover any damages or losses incurred outside of your office building.
In addition to general liability insurance, there are also specific types of coverage you should consider purchasing.
Here are a few common ones: Employment practices liability – If someone gets hurt at work and sues you for it (or if an employee accuses you of discriminating against them), employment practices liability insurance can help protect your company from claims related to discrimination or harassment.
What if I Don't Have General Liability Insurance?
Not having GLI is like operating with a blindfold—you have no idea what’s coming your way.
You might not be liable for an accident that results in property damage or bodily injury, but in many cases, you can be sued for negligence if you don’t have coverage.
Without a certificate of liability insurance, any claims made against your business could ruin it financially.
For example, say someone slips and falls at your business event and sues you for $100,000. If you don’t have insurance to cover such a claim, then you’ll be on the hook for paying out of pocket. Even worse: Your personal assets could become fair game under certain circumstances.
In other words, you could lose everything. So if you’re starting a new business, make sure to purchase GLI as soon as possible so that your company has protection from day one.
The good news?
A Business Owner's Policy (BOP) typically includes both general liability insurance and property insurance.
The bad news?
Property insurance isn't mandatory, so even if you're buying a BOP, it may not include property insurance.
It's important to note that these are two different policies; make sure you're aware of what each covers before purchasing either policy.
How Much Does General Liability insurance cost?
The cost of GLI depends on several factors, including how much coverage you need and how competitive your local insurance market is.
As with most insurance policies, businesses that face a greater risk of liability claims (such as restaurants) tend to pay more for their GLI than businesses that face fewer claims (like coffee shops).
The result?
In certain areas, it’s possible to get an insurance policy for less than $1,000 per year. In other areas, it might cost $10,000 or more.
Most insurance companies require businesses to have at least $300,000 worth of GLI.
However, if you operate a particularly risky business—say, construction—you may need even more coverage.
And while many people assume that large corporations are charged lower rates than small ones, it isn’t always true: Some insurance companies offer discounts based on company size or industry type.
How Do I Get General Liability Insurance?
Many business owners think that general liability insurance is an afterthought or a luxury.
The truth is, it’s an essential part of any solid insurance plan for small business owners. Here’s how to get it right.
The Business Owner’s Policy: Most insurance companies offer a type of policy called a business owner’s policy or BOP.
It combines several different types of insurance into one package at one low price.
This includes GLI and other insurance coverage you might need as a business owner, such as property insurance and worker's compensation insurance.
Insurance Companies: There are many insurance companies out there offering GLI coverage.
Some specialize in providing coverage to businesses while others provide coverage across all lines of insurance products.
To find out which company offers GLI in your area, contact your local agent or visit your state’s department of insurance website for more information on local providers.
