General Liability Insurance: Essential Business Protection

Just like insurance policies for your vehicle and residence protect your personal assets, general liability coverage safeguards your business and its resources. Based on what type of business you operate, you might require additional insurance protection, but every small business should begin with a general liability insurance policy. It is the foundation of small business liability protection.

In this guide:

• What is general liability insurance?
• Who should get a general liability policy?
• The cost of general liability insurance
• Frequently asked questions

What Is General Liability Insurance?

A general liability insurance policy is the foundation of your small business insurance protection, which might also include items like workers' compensation, an umbrella policy and commercial vehicle coverage. It generally protects your business liability, such as bodily injury, damage to someone else's property, copyright violations and lawsuits.

What Does General Liability Insurance Cover?

Your actual insurance protection depends on your policy, so work with your insurance carrier or broker, and read the policy carefully to get what you require.

General liability coverage can help shield your business from expenses associated with:

• Third-party bodily injury
• Third-party property damage
• Libel, slander and copyright infringement
• Lawsuit defense expenses, investigations, attorney's fees and settlements
• Personal and advertising injury (financial loss caused by your ad)

Just as a foundation isn't a house by itself, a general liability policy doesn't protect all your business insurance requirements.

Examples of Coverage

Example #1: A customer enters your small local grocery store. They go to grab something from a top shelf and all of the products fall off the shelf, knocking them on the head. Because you have general liability coverage, your insurance carrier will pay for their medical expenses and cover your defense costs and potential settlement for the customer injury.

Example #2: You launch an ad that pokes fun at another local small business owner. They claim the ad caused them to lose business and sue you for advertising injury. Because your insurance carrier provides protection for libel or slander and advertising injury, they'll cover associated claims.

What is Excluded from General Liability Insurance Coverage?

General liability typically does not protect:

• Damage to company vehicles
• Injury to employees
• Professional mistakes, such as malpractice

These coverage areas are also important, so discuss them with your agent to determine the best policies to meet your requirements.

Who Needs General Liability Insurance?

Every business should secure general liability coverage, including home-based businesses, small businesses, sole proprietorships and even independent contractors.

The coverage protects your business—however big or small—from financial harm when a customer or client sues for something like injuries, property damage, copyright infringement or property damage. Liability claims can bankrupt a small business, which is why general liability protection is so important.

Businesses That Need Another Kind of Coverage

You might require additional liability insurance protection on top of general liability, depending on your business operations. For example:

• When you manufacture or sell a product, you'll need product liability coverage.
• When you provide a service based on your expertise, you might want professional liability coverage.
• When you run the business out of your home, you might need home-based business coverage for certain liability protection.

How Much Does General Liability Insurance Cost?

The cost of general liability insurance policies vary similar to your auto coverage. How much protection you want, whether you've made previous claims, your industry, and your business's annual revenue all affect your insurance expense.

The cost of a $1 million business liability insurance policy starts at several hundred dollars annually. HowMuch.net offers these example expenses for small businesses by service type:

• Hair salon or barber shop: $450
• Cable or satellite dish installer: $550
• Retail store: $750
• Computer repair service: $400

Because the expense varies depending on many factors, it's best to speak with an insurance agent to get an accurate quote designed for your business. They can also help you determine the amount of protection you require.

Frequently Asked Questions

Does an LLC Need general liability insurance coverage?

Structuring your small business as an LLC or corporation offers some additional protection for your personal assets in case of lawsuits, but they leave your business assets vulnerable. General liability coverage steps in to shield your business assets. Some states also mandate some kind of business liability coverage. Likewise, someone like a general contractor must often provide proof of coverage to win a bid for a job.

What is the difference between commercial liability and general liability insurance?

There is no difference. General liability coverage is sometimes referred to as:

• Commercial liability insurance
• Commercial general liability insurance
• Business liability insurance
• Business general liability insurance

Each insurance carrier will likely refer to a general liability policy using any of these terms.

Is general liability insurance required by law?

Business owners are not legally mandated to purchase general liability coverage. Depending on your business, you might be legally required to purchase other insurance types. For example, the federal government requires any business with employees to purchase workers' compensation (in almost every state), unemployment and disability coverage.

Is there a difference between general liability and professional liability?

Yes. A general liability policy protects against third party bodily injury and property damage, while professional liability covers errors and omissions in professional judgment, such as negligence. Learn more from our guide, 'General Liability vs. Professional Liability Insurance'.

What is proof of liability insurance?

A certificate of insurance is like a receipt or proof of purchase for your liability coverage.

A company that subcontracts with you might ask for proof of coverage to confirm its covered for your work. Contractors you hire might also want to see it to confirm you can cover injury or property damage they experience.

To get a certificate of insurance, you can contact your insurance provider. Typically, you can find the certificate online, through your account at the provider's website. But you might have to email or call the company to request the certificate.

Is general liability included in a BOP?

Yes. A business owner's policy typically covers your basic business insurance requirements, including property and general liability coverage. It can be a good starting point for a small business owner, because it bundles your insurance requirements together, simplifies the buying process and saving you money.

Is general liability insurance tax deductible?

Yes, you can deduct the cost of liability insurance premiums and fees as a business expense.

Additional Insurance Options to Consider

Your business likely requires more than just general liability coverage. These are some other policies that small business owners can look at adding to their business insurance package.

Commercial property insurance: When you have a physical business location, this coverage can help pay the cost to repair your building and its contents when they are damaged or destroyed in a fire, natural disaster, or by theft or vandalism. The insurance carrier will repair the property damage and pay to replace the contents up to the limits of the policy.

Business Owners Policy (BOP): A business owners policy combines commercial property coverage, general liability protection, and business interruption coverage. An insurance carrier will often offer a BOP at a more affordable price than purchasing each policy separately.

Workers' Compensation Insurance: This can be considered part of employee benefits. Workers compensation pays an employee's medical bills and lost income when they are injured on a job site or become ill due to on-the-job exposures.

Commercial Auto Insurance: When your business uses vehicles for transporting products or driving to appointments, any injuries sustained in an accident might be excluded from your personal auto coverage. When your insurance carrier finds out, you might be left footing the bill.

Understand Your Insurance Options

General liability coverage is the starting point for commercial insurance. It costs around $500 annually, depending on your industry and other factors, and provides protection for your small business in case of lawsuits from the public, contractors, customers or clients.

Get a Free General Liability Insurance Quote

Our insurance specialists understand that every small business is unique, and we can help you understand your insurance options and translate your requirements into affordable protection. To get a competitive insurance quote, complete the form at the page top and an agent will connect with you.

‍