Running a small business can be a rewarding experience, but it also comes with its fair share of risks. As a business owner, you are responsible for protecting yourself, your employees, and your customers against any unexpected events. A small business general liability insurance policy can help mitigate these risks and provide peace of mind. In this article, we will explore the basics of small business general liability insurance, what it covers, and how to find the right policy for your business.
What is Small Business General Liability Insurance?
Small business general liability insurance, also known as commercial general liability (CGL) insurance, is a type of insurance that provides coverage for a wide range of business-related risks. These risks may include bodily injury, property damage, advertising injury, and legal defense costs. CGL insurance protects businesses against claims made by third parties, including customers, suppliers, and other visitors to the business premises.
CGL insurance is an essential component of any small business insurance program. It is designed to protect the business owner from the financial burden of lawsuits and other legal claims that may arise from everyday business operations. The policy provides coverage for both the legal costs involved in defending against a claim and any damages that may be awarded as a result of a successful claim.
What Does Small Business General Liability Insurance Cover?
A small business general liability insurance policy typically covers three types of claims:
- Bodily injury: If a customer or other third party is injured on your business premises or as a result of your business operations, your CGL insurance policy may cover their medical expenses and any damages they are awarded.
- Property damage: If your business operations result in damage to someone else’s property, your CGL insurance policy may cover the cost of repairing or replacing the property.
- Advertising injury: If your business’s advertising or marketing materials result in a third-party claim of libel, slander, or copyright infringement, your CGL insurance policy may provide coverage.
What is Not Covered by Small Business General Liability Insurance?
While CGL insurance provides broad coverage for many types of claims, there are some things that it does not cover. Some common exclusions include:
- Employee injuries or illnesses: These are generally covered by workers’ compensation insurance.
- Intentional acts: If you or an employee intentionally causes harm to someone else, your CGL insurance policy will not cover the damages.
- Professional services: If your business provides professional services, such as accounting or legal advice, you will need a separate professional liability insurance policy to protect against claims arising from errors or omissions in your work.
Who Needs Small Business General Liability Insurance?
Any small business that interacts with the public should consider purchasing a small business general liability insurance policy. This includes businesses that have a physical storefront, those that operate online, and those that offer services at customer locations. Even if your business does not have high-risk operations, accidents and other unforeseen events can happen, and a CGL insurance policy can help protect your assets and reputation.
Many businesses are required to carry general liability insurance as a condition of their contracts with customers, landlords, or lenders. It is important to review your contracts carefully to understand any insurance requirements and ensure that your policy meets those requirements.
How Much Does Small Business General Liability Insurance Cost?
The cost of a small business general liability insurance policy varies depending on several factors, including:
- The type of business: Businesses that are considered high-risk, such as those in the construction or healthcare industries, may pay higher premiums.
- The business’s location: Premiums may be higher in areas with high claims frequency or heavy litigation.
- The coverage limits: Higher coverage limits generally result in higher premiums.
- The deductible: A higher deductible can lower premiums, but it also means that the business will be responsible for a larger portion of any claims.
To get an accurate estimate of the cost of a CGL insurance policy for your business, it is best to consult with a licensed insurance professional. They can help you understand your coverage needs and provide quotes from multiple insurance carriers.
FAQ
What is the difference between general liability insurance and professional liability insurance?
General liability insurance provides coverage for claims arising from bodily injury, property damage, and advertising injury. Professional liability insurance, also known as errors and omissions (E&O) insurance, provides coverage for claims arising from professional services, such as medical malpractice or errors in accounting or legal work.
Do I need both general liability insurance and professional liability insurance?
It depends on the type of business you operate. If your business provides professional services, it is recommended that you carry both general liability insurance and professional liability insurance to ensure comprehensive coverage.
What is the difference between claims-made and occurrence-based insurance policies?
A claims-made insurance policy provides coverage for claims that are made during the policy period, regardless of when the incident occurred. An occurrence-based insurance policy provides coverage for claims that arise from incidents that occurred during the policy period, regardless of when the claim is made. Claims-made policies are typically less expensive than occurrence-based policies but may require the purchase of tail coverage to provide ongoing protection after the policy expires.
Can I add additional coverage to my small business general liability insurance policy?
Yes, many insurance carriers offer additional coverage options that can be added to a CGL insurance policy, such as cyber liability insurance or product liability insurance. It is important to review your policy carefully to ensure that it meets your business’s specific needs.
What happens if I don’t have small business general liability insurance?
If your business does not have general liability insurance and is sued, you will be responsible for paying any damages or legal fees out of your own pocket. This can be financially devastating and may even lead to the closure of your business. It is always better to be proactive and purchase insurance to protect your business.
Conclusion
Small business general liability insurance is an essential component of any business’s risk management strategy. It provides coverage for a wide range of risks that can arise from everyday business operations and helps protect businesses against costly lawsuits and legal claims. By understanding the basics of CGL insurance and working with an experienced insurance professional, small business owners can find the right policy to meet their needs and protect their business for the long term.