Questions to Consider When Buying General Liability Insurance


buy general liability insuranceSignificant financial losses due to unforeseen events and unplanned circumstances are every business owner’s nightmare. Property damage, injuries, accidents, and other liabilities can cause a huge dent in your business finances. Without insurance coverage or significant cash reserves, a large and unexpected liability could lead to your business shutting down operations permanently.

This is where General Liability Insurance comes to the rescue, providing liability coverage for some of the most common risks to businesses. While there are a wide variety of commercial insurance policies available on the market, general liability is the first building block for other policies and the core coverage that every business owner needs. But not all general liability insurance policies are crafted the same. Here are some important questions you need to ask yourself to ensure proper coverage for your business.

What is General Liability Insurance and what does it cover?

Often referred to as commercial general liability (CGL) or business liability insurance, this type of policy protects your business from a wide variety of liability claims. It provides coverage for bodily injury, property damage, damage caused to others by slander and libel, and liability due to unintentionally false or misleading advertisements. A general liability policy helps pay for related expenses associated with the claims, such as legal defense charges, settlement costs, and medical expenditures.

Business liability insurance aims to safeguard the interest and financial assets of your business from third-party liability claims, meaning a financial loss caused to others for which your business is responsible. Depending on the scope of the policy, general liability usually covers the following circumstances and events:

  • Bodily injury – common scenarios include slips and falls that happen on your business property resulting to harm or injuries to your customers.
  • Property damage – an example of this would be your landlord sues you for causing a fire that started within your office and part of the building was damaged as a result of the incident.
  • Copyright infringement – should someone file a lawsuit against you claiming that you copied their original designs and materials, CGL can protect your business against these legal claims.
  • Reputation damage – this applies to statements that might harm the reputation of an individual or business entity. One example would be comments posted on the internet.

Why do I need General Liability Insurance for my business?

Every business, whether big or small is a risky venture. But unlike big corporations, small businesses don’t always have a sufficient cash reserve to face a large and unexpected expense, such as liability for an injury. One single claim can spell trouble for the business you’ve worked so hard to build.

Should someone suffer an accident on your business property and you’re found liable for the injuries, just imagine the amount of money you need to shell out for the liability claims. The legal costs of defending your business, the medical expenses needed to treat the customer, and the possibility of compensating the loss of income can add up quickly. Unless you have sufficient financial means to cover up these expenses, your small business is always at risk if you don’t have proper insurance coverage.

General Liability Insurance is specifically designed to protect businesses from untimely incidents and mishaps. Although it is not required by law, it is usually required by landlords and is often required for work contracts. Think of it as a wise investment to safeguard your business affordably, giving you the peace of mind you need to focus on running your business.

How much liability coverage do I need for my business?

The amount of coverage is one of the most important considerations for any insurance policy. While obtaining the right type of policy for your business is essential, determining the proper coverage for the level of exposure your business has is crucial.

The general liability coverage limit, your business needs depends on the nature of your business, industry, location, and the perceived risks of a daily operation. For example, the coverage limits for a home-based consulting business will differ from the limits a machine shop should carry.

Generally, the most popular CGL insurance policy coverage for small business owners starts with $1,000,000 limit per occurrence and up to $2,000,000 aggregate. This means that while the policy is still active, the insurance provider will pay up to $1,000,000 for any single claim. The $2,000,000 aggregate is a maximum amount of coverage limit for the entire period of the policy, which is usually one year.

Keep in mind that choosing the right coverage for your business is very important because once the coverage limit has been reached, any remaining liability cost must be paid by the business and could even create a liability for the business owner.

How much does General Liability Insurance cost?

The premiums for General Liability Insurance vary depending on a number of factors which revolve around risk. Providers will usually ask relevant questions about your business to better understand the risk before they can offer a price quotation. Factors that will affect the premium of your CGL policy are as follows but not limited to:

Type of business – there are industries that require higher coverage than others. Businesses with higher risks of injury to others, such as building contractors, will need more coverage than an IT company or accounting firm.

Location of business – some states award higher amounts in personal or bodily injury lawsuits, creating a risk of a larger loss and a need for higher coverage limits.

Other key factors that need to be considered include risk to other properties, claims history, and severity of claims made. It is important to discuss the specifics of your business operation with your trusted provider to get an accurate quote for your CGL premium.

How can I reduce general liability risk?

While General Liability Insurance protects you from unexpected expenses due to liability, you need to do your part as the business owner to reduce liability risks as much as possible. Note that claims history affects your premium so reducing your risks will eventually lead to lower premiums as your business builds a claims-free history.

The general rule to reduce liability risks is to behave in accordance with laws and safety regulations, considering the welfare of your clients, competitors, employees, and the general public. Consider these tips to help lower your liability risks:

  • Maintain a safe environment for the public
  • Provide adequate lightning
  • Exits should be well marked and free from obstacles
  • Floors and walkways should be dry and kept in good condition
  • Refrain from damaging anyone’s reputation
  • Don’t post libelous comments on the internet
  • Don’t utter slanderous words to others
  • Post warning signs for potentially unsafe conditions, such as construction areas
  • Always test and verify products
  • Provide detailed product information
  • Warning signs should be visible from  a safe distance

Get a quote for General Liability Insurance!