What is General Liability Insurance and How Much Does It Cost?

Running a business is an exciting adventure. You bring something into existence out of nothing. It is your passion and your livelihood. But with each customer that you service, there is a risk. What if the way if someone should get hurt? What happens if you cause some damage to property? This is where General Liability Insurance comes in.

It serves as an important safety net to your company. This guide will help you to understand everything that you need to know. In this series of articles we will discuss what it is and what it is protecting. We will also explore its cost. Don’t protect your dream – It is the first step to success.

Every business journey is different in the sense that it has its unique challenges. There are some that you can predict, and some which you can’t. Insurance – helps you be prepared for the unexpected. We think the more knowledge you possess about your options the better. For many startups, finding affordable business insurance can be a huge task to find affordable business insurance. But it does not have to be. We are here to make it a little simple and straight. Let’s start with the definition of this important coverage.

The Foundation of Business Protection

What Exactly Is General Liability Insurance?

Think about General Liability Insurance as your business’s first Line of Defense. It defends you against the claims of the third party. Third party is anyone who is not on your payroll. This includes customers, clients, vendors and visitors. If they say your business did them harm then this policy helps.

It covers bodily injury or property damage. It also handles personal and adverts injury. This policy is frequently known as commercial general liability (CGL). It is a basic component of any risk management plan. Without it a single lawsuit could be financially devastating. This type of liability insurance is in place in case you need to keep on operating.

Why is it Called “General” Liability?

The word “general” is key here. This policy offers general protection against standard risks. It covers the regular incident that can occur on a everyday basis. A customer falls on a wet floor. Your employee kills a client’s window. These are tried and true samples of general liability claims.

However, it is not a fool-proof solution. In contrast to more specific policies. For example, it fails to cover professional mistakes. For that, you would need separate professional liability coverage. Nor does it cover work-related car accidents. That requires a special commercial auto insurance policy.

Core Components of Liability Insurance Coverage

General liability insurance coverage is constructed on just a couple of pillars. Each one offers you different protection from different kind of risk. To understand the value of these components. It reflects to you how this policy will protect your assets. Let’s break things down as far as the main areas of coverage is concerned.

Risk comes, “from (not) knowing what you’re doing”.

– Warren Buffett

Bodily Injury Coverage

This is one of the most common grounds for claims. Bodily injury coverage will cover you if someone is hurt. This may be on your business premises. It could also be because of your business operations.

Imagine a customer comes in your shop. They take a fall on a hassle in the rug, and break their arm. Your policy can help to pay their medical bills. It can also cover for your legal fees in case they sue. This protection is important for any business that has a physical location. Even home-based businesses that have clients visiting them need it.

Property Damage Coverage

This part of the policy includes when an injury has occurred to another person’s property. If you/ your employees are responsible, you are protected. The damage may occur at your place or that of the client.

For instance, a landscaping company is working at a home. An employee accidentally breaks in a huge window with a rock. Your liability insurance can pay for the replacement of the window. It is saving you from a huge out-of-pocket expense. It is also important for keeping your professional reputation intact. Many clients now demand proof of this certainty before they will hire you.

Personal and Advertising Injury

This coverage is lesser understood but very important. It has protection against damages that are not physical. These often have come from your business advertising or communications. It covers claims like:

• Slander (spoken defamation).
• Libel (written defamation).
• Copyright infringement.
• Plagiarism of advertisement ideas.
• Invasion of privacy.

Let’s say your new marketing slogan is too close to your competitor’s. They sue you because you have used their idea. This section of your policy would help pay your legal defense. It helps to protect your business against costly marketing missteps. It’s an essential barrier in the modern world of competition.

Who Needs General Liability Insurance for Small Businesses?

The short answer is just about any business. General liability insurance for small businesses is not only for big business companies. It really is essential for startups and for sole proprietors. Interact with the public in any fashion and you have risk. This is insurance to deal effectively with that risk.

Some businesses have more risk than others. A construction contractor has a greater risk than a freelance writer. But even a writer is subject to a libel claim. It is about having an understanding on your particular exposures. While some businesses such as a classic car business could look like a niche business, they also have liability risks.

Is General Liability Insurance Legally Required?

In the vast majority of states, general liability insurance is not required by law. However, that does not mean that it is optional. Many situations in business make it a practical necessity. For instance:

• Landlords: Most commercial landlords require it of their tenants.
• Client Contracts: Many clients will not sign a contract if they don’t sign.
• Licensing: There are various state and local licenses which demand proof of insurance.
• Loans: Lenders might also require it in order to give a business loan.

So the bottom line is that while the government may not hold you at gunpoint, the market often does. It is a normal cost of doing business. It shows the clients and partners that you are professional. This proves to them that you are prepared. Even one such policy such as Humana dental insurance is a kind of specialized liability management for your well-being.

High-Risk vs. Low-Risk Businesses

Your industry plays an enormous role in your need for this insurance. A business that has frequent interaction with the public is a high-risk business. They also work in the environment in which accidents are more likely.

• High-Risk Examples: Construction, restaurants, retail stores, cleaning.
• Low-Risk Examples: On-Line consultants, Free-lance writers, Soft-ware developers.

Even low-risk businesses are not risk-free. One’s consultant might spill coffee on one’s client’s expensive laptop. A writer could sued for libel. The premium will be low for low-risk businesses. But the need for protection is still there. For example, even with great United Healthcare insurance plan, personal health coverage doesn’t protect your business.

The Big Question: How Much Does General Liability Insurance Cost?

This is the question of each business owner’s mind. The cost of General Liability Insurance is very wide. There is no single price tag. Your premium will be unique to your business. It is based on a number of factors that are used by insurers to assess your risk.

The good news is that for many small businesses, it is not so expensive. The median cost is around $40 to $60 a month. But your price might be too high or too low. Let’s see what the deciding factors are of the final cost that will determine your money.

Proverbs says that “An ounce of prevention is worth a pound of cure.”

– Benjamin Franklin

Key Factors That Influence Your Premium

There are many details on your business that insurers look at. With this information they are able to calculate your degree of possible risk. The higher the risk, the higher the premium. Here are some of the most important factors.

Industry and Risk Level

Your type of business is your biggest factor. A roofer will always demand more than a graphic designer. The work of a roofer is of far greater tendency to result in injury or property damage. Insurers possess specific information about claims by industry.

Business Location

Where you operate matters. There are higher rates in certain states because those with more lawsuits are included. A business located in an urban area with a high-traffic flow could pay more. This is because there is more opportunity for public interaction.

Coverage Limits

It is up to you how much coverage you wish to have. A typical small business policy may carry a $1 million cover per occurrence policy. It could also have a $2 million aggregate limit. Higher the limits, the more the protection and the higher the premium. Just as you would compare term life vs. whole life insurance for your own needs, you need to keep coverage vs. cost as your business needs.

Number of Employees

More employees equals more risk, in many cases. They provide more chances that accidents can occur. Your payroll size is often used in helping calculate your premium.

Claims History

Your Past claims history Important. A business having a history of frequent claims will be paying more. This is perceived by insurers as an indicator of increased future risk. A good clean record for keeping your costs down. This is similar to the way that your driving record will affect your motorcycle insurance rates.

Diving Deeper: What Isn’t Covered?

General Liability Insurance is very powerful, but it does have limitations. It is very important to know its exclusions. This knowledge helps you to identify holes in your coverage. You may need other policies to protect your business completely. So think it like a State Farm life insurance policy, it only covers one big area of risk, not all.

Common Exclusions in a GLI Policy

Here are some of the non-standard general liability policy risks that you can expect:

• Employee Injuries: If an employee becomes injured on the job, you need Workers’ Compensation insurance.
• Professional Errors: When there is an error in your professional services, one needs Professional Liability Insurance. This too is also known as Errors & Omissions (E&O).
• Auto Accidents: Accidents that happen with business-owned vehicles require Commercial Auto Insurance. Even if a purpose vehicle is used for work, some gaps may arise, making it necessary to use temporary car insurance solutions or special endorsements.
• Your Own Property: Damage to your own property in the business (building, equipment and inventory) – Commercial Property Insurance.
• Intentional Acts: The policy will not include intentional harm/damage caused by you or your employees.
• Cyber Attacks: Data Breaches and other cyber crimes require a specific Cyber Liability Insurance policy. You can find out more about risk management from reliable sources such as the U.S. Small Business Administration (SBA).

Bundling Policies and Saving Money

One of the best ways to obtain comprehensive coverage is to bundle. Not only can you save money this way, you will save money. Insurances have packages that integrate several major policies. This makes your insurance management so easy.

The Power of a Business Owner’s Policy (BOP)

For many small and medium sized businesses, a Business Owner’s Policy (BOP) is a great choice. A BOP generally contains three critical coverages:

1. General Liability Insurance: The general liability insurance that we’ve been talking about.
2. Commercial Property Insurance: In case you have a building, insurance is usually necessary for both your building itself and the contents.
3. Business Interruption Insurance: Assists you by replacing the lost income due to temporary closure of business.

Buying a BOP is often much cheaper than purchasing these three policies individually. It is designed for the businesses of the lower-risk industries. Talk to an agent to determine whether your business is eligible for a BOP. For more information on business insurance coverage, this is a great guide created for you by Investopedia.

Tips for Lowering Your Insurance Costs

Apart from bundling, there are some other ways you can deal with your premium. There are things, however, that you can do to reduce your risk. This can allow for reduced expenses in the long run. Following these tips on how to lower your car insurance cost can serve as an inspiration for doing the same with your business policy.

• Implement a Safety Program: Documented Safety Procedures Demonstration that you are proactive.
• Choose a Higher Deductible: a higher deductible means that you will have to pay more out-of-pocket money on a per-claim basis, but you’ll have a lower premium.
• Review Your Policy Annually: Your business changes. Get your materials (ensure that your coverage can still go over an area). You will be paying for coverage you doesn’t need anymore.
• Compare Quotes: Don’t Accept the First Offer. Shop Around and Compare Quotes. On the other hand, shop around and get multiple quotes from various insurers. Reputable sources such as The Hartford meaning that you can easily get quotes online.

Conclusion: A Non-Negotiable Investment

General Liability Insurance is not only a cost. It is an investment in the future of your business. It safeguards the business that you have worked so hard to build up. From a relatively harmless slip and fall to a complicated advertisement lawsuit, covers you from financial ruin. The peace of mind that it gives is invaluable.

Because you don’t need to worry about what you don’t do best: service your customers and grow your company. Understanding your risks and getting the appropriate coverage is the hallmark of a smart business owner. Take the time to earn an assessment of your needs, understand your options and safeguard your dream. Your future you will be thanking you for it.

Frequently Asked Questions (FAQs)