General liability insurance, also called business liability insurance, protects you and your business from the high costs of personal injury or property damage lawsuits. Of course, going into business means assuming certain risks. Yet many business owners would be financially devastated if they had to pay out a costly lawsuit. General liability insurance is meant to protect you and your business in case the worst happens.
What Does Liability Insurance Cover?
General liability insurance covers you in a variety of instances. Policies sold by most insurance companies include financial protection from third party claims involving personal or bodily injury, advertising injury (e.g. slander, libel, copyright infringement) and property damage.
In the event that your business is sued, your general liability policy will cover your attorney’s fees, all fees associated with going to court, and any settlements and judgments that might be made against you. Your policy will also cover medical expenses if someone gets hurt at your place of business. Of course, how much you can be paid out depends on the limits of your coverage. Your policy’s limit may not fully cover a lawsuit settlement. In that case, you’d be on the hook for paying the difference.
Some states mandate general liability insurance for specific industries, such as construction.
What Doesn’t Liability Insurance Cover?
It’s important to note that general liability insurance does not protect you if you’re sued by your employees. General liability insurance is specifically geared towards third party liability. To protect yourself against claims by your employees, you’ll need workers’ compensation insurance, which is mandated by law in most states.
Other potential liabilities that your policy won’t cover include auto accidents, professional mistakes and workmanship issues. Further, punitive damages are not covered by general liability insurance in most states.
How Much Does Liability Insurance Cost?
The costs for general liability insurance policies can vary greatly. An insurance company will base the cost of your policy on several factors. First, it looks at the type of business you’re in, and how risky it is. For example, construction is considered to be a high-risk business, so you’ll pay higher premiums to reflect that risk.
The insurance company also looks at how long you’ve been in business, the location of your business, the size and condition of your workplace, and even perhaps your history of claims. If your business has a history of legal problems, you will probably pay more for coverage. If your business is located in a pricey metropolitan area, your coverage may reflect that higher cost. If you just opened your business last year, the insurance company could see you as a riskier endeavor, and charge you a higher premium. If your company is headquartered in an old, dilapidated building, expect to pay more for that, too.
Another determining factor for the price of general liability insurance is your coverage limit. If you want a lot of coverage, you will pay more for it. However, if you opt for a high deductible, your premium will cost less.
Additional, tailored coverage is widely available at an extra cost.
Read More: What Is Commercial Insurance?
Who Needs Liability Insurance?
For any business owner, it’s considered a best practice to have general liability insurance, even if it’s not mandated by state law. Independent contractors are also encouraged to purchase general liability policies. Most of the risks covered by general liability insurance are invisible, yet they can have devastating consequences for your business. Even the most basic liability coverage could protect you if something unexpected happens.
General liability insurance protects your business from the high costs of third party claims involving personal or bodily injury, advertising injury (e.g. slander, libel, copyright infringement) and property damage.