Insurance policies can be one of the most complicated and confusing parts of being a business owner. There are many different plans and policies to consider, and each one sounds necessary and important.
Before you open your doors, you
might wonder: Do I need general liability insurance? This is a common type of
business insurance that many owners and operators require, but you might
not know too much about it.
Today, we're covering what this type
of policy includes and whether it's right for you.
What
Does General Liability Insurance Cover?
General liability insurance is a
policy that protects your business if bodily injury, personal injury, or
property damage occurs on your premises. Other names for this type of
policy include commercial general liability insurance and business
liability insurance.
While these offenses might sound
similar in nature, let's break down the subtle differences between them.
Bodily
Injury
As the name implies, bodily injury
occurs when someone experiences a physical injury to their body while on your
commercial property. For instance, a visitor might roll their ankle on
your sidewalk or a customer might slip and fall in your warehouse.
Personal
Injury
Personal injury is an attack on
someone's character. It includes offenses such as libel or slander. If someone
sues your company for making a defamatory statement against them, general
liability coverage could protect you from a costly lawsuit.
Property
Damage
Property damages occur when an
employee's actions cause any level of destruction to personal property.
For instance, an HVAC technician
might slip and break a window at a customer's home. Or, painters might spill
paint on a homeowner's carpet when working on a project.
If these instances occur, general
liability insurance can help cover the costs required to repair or replace the
damaged item.
Different
Types of Coverage
There are many different ways that
your general liability policy can kick in when you need to make a claim.
This includes
- Covering the cost of property damages
- Covering medical expenses for bodily injuries
- Covering claim-related administrative costs
- Covering claim-related legal costs (judgments, court
costs, settlements)
When you sign up for a plan, you'll
work with your insurance agent to determine how much coverage you need.
When you need to access those funds, you'll only be able to use up to that
limit.
What
Does General Liability Insurance Not Cover?
Most general liability insurance
policies are relatively comprehensive in nature. They can be applied
to various types of claims, and keep you covered if a common accident
occurs.
However, it's important to
understand the types of claims that this policy will not cover.
Let's take a look at some of the top ones.
Commercial
Vehicle Accidents
Did your employees get into an auto
accident while driving for work? If so, only a commercial auto insurance
policy can cover those related costs.
Note that this type of
policy usually only applies to company-owned vehicles. If you require your
employees to use their own vehicles to perform work-related tasks, then you
should consider hired or non-owned auto coverage, instead.
Employee
Injuries or Illnesses
If an employee gets hurt or sick
while at work, you'll need a workers' compensation insurance policy, not a
general liability one. This policy can help pay for their medical expenses,
hospital stays, and rehabilitation costs.
Professional
Mistakes
Did you make a mistake while
performing a professional service for a client? For instance, you
might miss an important deadline or fail to notice a critical
mistake.
To cover those costs, you'll need
professional liability insurance. This coverage will kick in if a client sues
you for such an error.
Commercial
Property Damage
If an incident results in damage to
your own workplace, a general liability policy won't cover
you. Instead, you'll need to invest in commercial property insurance.
These policies usually cover the
physical structure of your building, as well as any detached structures on your
property and the business equipment within them.
Claims
in Excess of Your Limit
For a small business facing a
major claim, one insurance policy might not be enough to cover the full extent
of the damages.
A commercial umbrella insurance
policy can help you cover those super-expensive claims. This policy essentially
extends the limit on your liability insurance coverage so you can claim a
higher amount if required.
Speciality
Policies
In addition to the basic insurance
policies described above, there are certain businesses and industries that
require an insurance plan designed around their unique needs.
For instance, leaders at religious
institutions can choose to purchase different types of church insurance, which covers their special events, protects their physical
property, and protects their administration against legal claims.
Do
I Need General Liability Insurance?
Now that we've covered what it will
and will not protect, let's answer the most pressing question: Who needs
general liability insurance?
In short, if you're a business
owner, then it's smart to cover your company with this type of policy. In fact, some
states will require that you have this coverage in place.
Why is it so important?
If you're not currently embroiled in
a legal battle, then you might not think too much about the price of legal
defense fees, court costs, and settlements.
However, the reality is that these
expenses can quickly add up, and few companies have the cash flow available to
pay for them out of pocket.
As soon as someone files a claim
against your company, you'll start racking up bills, with charges for services
that include:
- Legal counsel
- Administrative work
- Court secretaries
- Settlements or judgments
A typical general liability case can
easily costs hundreds of thousands of dollars. Even if your company does
have that cash on hand, it's unlikely that you want to spend it on these
charges.
Benefits
of Investing in This Type of Insurance
If your state doesn't require your
business to hold general liability insurance, it's still smart to invest in a
policy. Here are a few reasons why.
Build
Stronger Partnerships
If you work at a B2B business,
there's a good chance that a potential partner could turn you down if you don't
have a general liability insurance plan in place. This is because the risk of
working with you would simply be too big.
If your business can't survive a
liability claim, then you could be forced to shut your doors temporarily or
even forever. That's a chance that most partners aren't willing to take.
Protect
Your Brand Image
If you have any type of business
that's open to the public, you need to care about your brand image.
Put simply, this is how your buyers or clients view your company.
If your brand name is tarnished due
to a high-profile, expensive liability claim, then it can be nearly impossible
to recover from such a hit to your image. This policy can help you avoid such a
setback.
This is especially the case if you
use social media to promote your business in any capacity. If you
handle a claim incompetently, it can spread like wildfire through these
platforms.
Peace
of Mind
If someone filed a major
claim against your company, would you have the resources on hand to cover
yourself? Most small business owners don't have these assets in place.
If you eschew a general liability
policy, you could be required to pay out-of-pocket for any type of property
damage, bodily injury, or personal injury that affects your business. When you
have coverage in place, you can rest assured that you won't have to do it
alone.
How
Much Coverage Do I Need?
As you prepare to buy a general
liability policy, you'll need to provide your agent with a few important
details. By sharing information about the size and scale of your company, you
can help them understand the exact amount of coverage you need.
These details include:
- The type of business you operate
- The number of employees you have
- The geographical location of your business
- Your state's specific insurance requirements
- How long your company has been in operation
- Any existing insurance policies that you currently have
in place
An insurance agent will use all of
this information to determine your company's level of risk. In other words, how
much of a liability will you be to insure?
Protect
Your Business With General Liability Insurance
Especially if your state doesn't
require it, you might be asking: Do I need general liability insurance?
While the answer hinges on a
few major factors, the bottom-line answer is a resounding yes. This type
of policy helps protect your company when accidents occur and you're the
one held responsible.
It can keep your doors open, your
brand intact, and your customers satisfied. It also helps you preserve valuable
financial resources.
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