Everything You Need to Know About General Liability Insurance

As an entrepreneur, whether you’re a small business owner or a freelancer, it’s crucial to protect yourself from unforeseen circumstances that can arise in the course of your business. One of the most important forms of insurance coverage that you need to consider is general liability insurance. In this article, we’ll dive deep into understanding what general liability insurance is, how it works, what it covers, and why it’s important for businesses of all sizes.

What is General Liability Insurance?

General liability insurance is a type of insurance coverage that provides protection for a business and its owners from third-party claims of bodily injury, property damage, and related expenses. It is also commonly known as commercial general liability (CGL) insurance, and it covers a wide range of risks that businesses face in their day-to-day operations. The insurance policy typically covers the cost of legal defense, settlements, and judgments if the business is found liable for the covered claims.

How Does General Liability Insurance Work?

When a business owner purchases a general liability insurance policy, they pay a premium to the insurance company. In exchange, the insurance company agrees to pay for damages and legal expenses resulting from covered claims. The policy typically has limits on the amount of coverage available for each claim and a maximum amount of coverage for all claims during the policy period.

If a third party files a claim against the business, the business owner should immediately notify their insurance company. The insurance company will then investigate the claim, provide legal defense, and negotiate a settlement or pay a judgment if the business is found liable. If the damages exceed the policy limits, the business will be responsible for paying the excess amount.

What Does General Liability Insurance Cover?

General liability insurance covers a wide range of risks that businesses face in their day-to-day operations. The policy typically covers bodily injury, property damage, personal injury, and advertising injury caused by the business or its products or services. Here are some examples of covered claims:

General liability insurance typically does not cover intentional acts, criminal acts, or professional services. For those risks, separate insurance policies may be required.

Why is General Liability Insurance Important?

General liability insurance is important for businesses of all sizes because it provides protection from unexpected risks that can result in financial loss. Without insurance coverage, a single claim can bankrupt a small business or put a freelancer’s personal assets at risk. In addition, many clients and customers require proof of insurance before doing business with a company or individual.

Even if a business owner believes they have done everything possible to avoid accidents or lawsuits, unforeseen circumstances can arise, and having general liability insurance can provide peace of mind and protect their business from financial fallout.

FAQ

How much does general liability insurance cost?

The cost of general liability insurance varies depending on the size of the business, the industry, and the level of coverage needed. Typically, small businesses can expect to pay a few hundred dollars per year for basic coverage, while larger businesses with more risk may pay thousands of dollars per year.

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

General liability insurance covers bodily injury, property damage, and related expenses resulting from a business’s operations or products. Professional liability insurance, on the other hand, covers claims arising from professional services, such as errors and omissions, malpractice, or negligence.

Does general liability insurance cover cyber liability?

General liability insurance typically does not cover cyber liability, which includes data breaches, cyber attacks, and other cyber-related risks. For those risks, separate cyber liability insurance may be required.

Is general liability insurance required by law?

General liability insurance is not required by law at the federal level. However, some states, cities, or industries may require businesses to carry certain types of insurance, including general liability insurance. Business owners should check with their state or local government and industry organizations to understand their insurance requirements.

Can general liability insurance be canceled at any time?

General liability insurance policies typically have a term of one year and renew automatically unless canceled by either the business owner or the insurance company. However, the policy may be canceled at any time if the business owner fails to pay the premium, misrepresents information on the application, or engages in fraudulent activities.

Conclusion

General liability insurance is a critical form of insurance coverage that protects businesses from unforeseen risks that can lead to financial loss. Business owners should carefully consider their insurance needs and purchase a policy that provides adequate protection for their business. By understanding what general liability insurance is, how it works, what it covers, and why it’s important, entrepreneurs can make informed decisions and protect their business from potential liabilities.