Whether you’re a budding entrepreneur or a seasoned small business owner, chances are you need to get more acquainted with general liability insurance. It’s not exactly the sexiest topic to delve into, but it is absolutely necessary for all small business owners to know about.
What Exactly Is General Liability Insurance?
This type of insurance policy is designed specifically for businesses (or commercial entities), and it allows them to be protected from third-party legal claims against their company. This includes claims stemming from property damage, personal injury, reputation harm, or even advertising injury.
Why Should You Care About Having A Liability Policy?
Imagine if one of your employees injures their foot at your business’s location. They decide to file legal action against you, essentially demanding that your company pay them for their injury. If your company has a liability policy, most of the costs would be covered. However, if you don’t have liability insurance, you would be left to be solely responsible for the payment of all legal fees (and potentially the legal claim of your employee). The associated costs of this one claim could easily add up to well over $100,000. This is why it’s imperative that all small businesses have a general liability policy.
Liability Insurance Coverage Types
Third-party personal injury claims are one of the leading types of claims against small businesses. This is when a third party injures themselves at a business, and then decides to pursue legal action against that business. It’s the classic “slip-and-fall” legal claim. However, this type of coverage not only protects you from the general public’s claims, but it also protects you from any legal claims made by your employees as well.
Property damage is another coverage type included in nearly every single liability policy available. An example of this would be one of your employees causing damage to a client’s business (or property), and then the client pursuing legal action against your company.
Advertising injury and reputation harm are two of the most common types of legal claims made against companies across nearly all industries. This is when another business claims that your business somehow damaged their reputation. Or, it could also be a customer suing your company for a product that wasn’t advertised correctly (i.e. the advertisement wasn’t a true representation of the actual product).
Is There Anything That Liability Insurance Doesn’t Cover?
While having a general liability policy will certainly protect your business from many different types of claims, it’s not fool-proof. In fact, most policies will clearly provide exactly what they cover (and what they don’t cover). Not only that, but there are also monetary limitations to most policy types.
The industry average goes up to one or two million in coverage. If your company requires coverage over that threshold, you’ll most likely need to purchase an umbrella policy (or additional policies) in order to cover that. The list posted directly below details exactly what isn’t covered in a business liability insurance policy.
- Professional negligence
- Commercial property damage
- Damage that was caused by your business intentionally
- Damage to a client’s property that was damaged while in your possession
How Much Will It Cost To Purchase A General Liability Policy?
How much it will cost depends entirely on a few different factors. One of the main factors is the industry that your business operates in. For example, a company that doesn’t perform any physical labor will not have to pay as much as a landscaping (or manufacturing) company. This is mainly because there’s far less risk involved in performing account audits than there is in doing manual machining work.
General liability insurance for small business by Next Insurance, like most other companies, takes into account the following factors when determining a quote:
- The location of your business/area of operation
- Your prior claim history
- Your past business operations
- Current business operations
- How large your payroll is
- How long you’ve been in business
- The size of your business
- The type of your business
The average cost for a typical policy goes for anywhere between $300 to $350 (premium per year). But, this number could easily reach into the several thousands, depending on the factors listed above.
In today’s world of countless lawsuits, it would be incredibly unwise to not have liability insurance for your small business. When purchasing a quote, it’s recommended to go with the company that offers you the most coverage (for a price within your target budget).