General Liability Insurance

When running a business, accidents happen and then someone – usually the business entity itself – needs to take responsibility. General liability insurance, also known as business or commercial liability insurance, covers businesses for general claims related to bodily injury to a third party and property damage. Out of all the insurance products for business owners, general liability insurance is among the most important.

Continue reading to learn the nuances of general liability insurance, when a business is going to need it, and tips for saving money on the insurance policy.

What Is General Liability Insurance?

In short, general liability insurance covers businesses for expenses related to bodily injuries, personal injuries, and property damage. The damage must have been caused by business operations, products, or occurred on the business premises. If you receive a liability claim, you will need to cover the costs.

There are two primary types of general liability insurance: claims-made policy and occurrence policy. Which one you should get depends on your business needs.

Claims-Made Policy

Under the claims-made policy, you are covered when the claim is made while the insurance policy is active. Losses must have occurred after the policy’s retroactive date. The retroactive date determines how old a loss can be for the claim to be covered.

You will be uninsured once the policy expires or is cancelled. These policies usually have lower premiums, but might pose problems once cancelled or switched to a different policy.

Occurrence Policy

With the occurrence policy, you are covered for the insurance period even after the policy has expired. In other words, you can file a claim for losses that happened while your policy was active regardless of whether you have insurance at the time of filing the claim.

These are simpler to own, especially since you can still file claims for previous losses when you switch to a different insurer. A new aggregate limit is given with each renewal.

General liability insurance can be combined with commercial property insurance in the business owners policy.

What Does General Liability Insurance Cover?

Such policies typically include the following coverages:

Bodily injury and medical expenses – In the event a third party is injured on your business premises, you will be covered for any medical bills or monetary claims in a lawsuit.
Property liability – In the event either you or an employee damages another entity’s property, e.g., breaking some other company’s sign, you will be covered for the cost of repair or replacement.
Personal and advertising injury – When claims will be submitted for libel, slander, or copyright violations, you will be covered.

Although general liability insurance is considered comprehensive, there are a few things it does not cover. These include:

Damage to your business premises or items inside – To be covered, you will need either commercial property insurance or a business owners policy.
Employees’ work-related injuries or illnesses – To cover those claims, you will need workers’ compensation insurance.
Allegations of job done improperly – Claims might be filed for errors, omissions, and losses that stem from those. You will need professional liability insurance to have coverage in those situations.

Who Needs It?

Many entrepreneurs benefit from the financial protection it offers. While general liability insurance is not required by law, it is necessary de facto as liability claims have become increasingly more common, especially when working with clients directly. A one-off unsatisfactory incident with a customer or a neighboring business could become the ruin of a business. However, with proper insurance, the risk of bankruptcy can be significantly reduced.

Additionally, for some professions, general liability insurance might be more cost-effective than a business owners policy, e.g., when there are no premises to insure.

Here is a non-exhaustive list of professionals that benefit from general liability insurance:

Contractors and handymen
Event organizers
Entertainers and DJs
Consultants and freelancers
Photographers
Personal trainers
Pet sitters
Hairdressers
Web designers
Landscapers

Finally, some insurance companies provide general liability insurance under business owners insurance without any additional property-related coverages.

How Can I Save Money?

Insurance saves you money in the long run, but that does not mean you cannot or should not save money on the coverage itself. You should always try to get the best possible deal on the market. When hunting for a policy, consider these things:

Multiple policies – If you already have an insurance provider for other policies, ask if you can bundle your policies together for a discount.
Do not go with the first offer – Always make sure you get multiple quotes from different insurance companies. Agencies can calculate risk differently, so get the policy that benefits you most.
Increase your deductibles – You can decrease your premiums by increasing your deductibles. However, in the event of a claim you will have to pay more out-of-pocket.
File claims carefully – Your history of claims is factored into your insurance premiums. Thus, the less claims you have made in the past, the lower your premiums will be.
Ask for discounts – Whenever you buy an insurance policy, always check whether you qualify for a discount.