General Liability Insurance

General liability insurance protects a small business from claims arising in a variety of situations, such as injury,  damage, advertising injury, and personal injury.

In addition to covering legal fees and settlement costs,  liability insurance also protects against any reputational damage caused by the incident.

For example, if a customer brings a lawsuit against your business for discrimination or slander,  liability insurance could pay for legal expenses and the cost of loss of income due to a damaged reputation.

The primary purpose of liability insurance is to safeguard your business from financial ruin in the event of an accident or lawsuit.

As previously mentioned, a single claim could be enough to bankrupt a small business. With liability insurance in place, you can rest assured that you have coverage to help pay for any costly legal fees or settlements.

To expand on this point, imagine that you are a contractor working at a construction site, and your employee accidentally damages an expensive piece of equipment another contractor owns. The owner of the equipment sues you for damages. Without liability insurance, the cost of damages could exceed what your business can afford to pay. Liability insurance protects your business in such cases. In fact, liability insurance covers legal expenses too. 

It’s also worth noting that many contracts with vendors or partners may require proof of general liability insurance before doing business with you. This means having general liability insurance helps safeguard your entity from potential lawsuits but also ensures that you can conduct business with reputable companies.

Some might argue they don’t need general liability insurance because they have never had an accident or don’t work in high-risk industries. However, even low-risk sectors are not immune to accidents or lawsuits. For example, if someone were to trip and fall on your property and suffer injuries requiring medical attention, you could still be liable without coverage. But the fact is insurance can help cover medical expenses as well as claims made against your business. The insurance company will pay for all such expenses and help protect your small business.

Not all businesses need general liability insurance, but for some, it’s essential. Here are some factors to consider when deciding if your business needs this type of coverage:

Types of Businesses Need Coverage: Some businesses are more likely to face third-party claims than others.

For example, a construction company is more at risk for bodily injury claims than an accounting firm. You may be more vulnerable to lawsuits if you have a public-facing business or offer a physical product or service.

Let’s consider the case of a landscaping company. Their employees work with heavy machinery and sharp tools, which could lead to accidental customer injuries.

They may also damage property while working on clients’ lawns and gardens. In this case, general liability insurance would be necessary to protect against potential lawsuits.

Covered Exposures and Limits: It’s vital to assess what risks your business exposures and how much coverage you need to mitigate those risks. For example, suppose your business operates in an urban area with high foot traffic. In that case, you may need higher coverage limits than a similar business in a rural area with less traffic.

Continuing the example of the landscaping company, if they operate in a densely populated urban area with expensive real estate values, their policy limits should reflect these higher risks.

Ultimately, deciding whether to purchase general liability insurance depends on evaluating the specific needs and risks of your business operations.

Working with an experienced agent or broker like The Allen Thomas Group can help guide you through that process so that you can make informed decisions about protecting your business.

Now that we’ve covered how general liability insurance works and how to evaluate your business needs let’s explore types of businesses that need coverage and then we can dig into the costs and factors affecting pricing.

General liability insurance is a vital protective tool for many types of businesses.

Any business with a physical location that interacts with third parties in other areas or provides advice or services can benefit from this coverage. Here are some specific industries that may need general liability insurance:

Construction companies: Construction companies often have heavy machinery and employees working on job sites. There is always a risk of accidents, causing bodily injury or property damage to third parties. General liability insurance can help cover these claims and avoid costly lawsuits.

Professional service providers: Businesses that provide professional services, such as accounting firms, law firms, and consulting agencies, are exposed to liability risks associated with providing advice and expertise. Even minor errors or omissions on the part of the business can lead to devastating financial losses. General liability insurance offers protection in case of lawsuits arising out of these errors.

Food and beverage industry: Restaurants, bars, catering services, and food truck vendors all face risks related to food safety and sanitation issues. These businesses can be held liable for illnesses caused by their products or services, resulting in legal claims from customers. General liability insurance can protect these businesses from associated costs.

Retail stores: Accidents, including retail stores and shopping malls, can happen anywhere. These accidents may involve customers slipping on wet floors or tripping over merchandise displays. General liability insurance ensures that these businesses won’t suffer financially from these unexpected events more than necessary.

Sole proprietors: A sole proprietorship is a business structure where one person owns and runs the company. Depending on the nature of the business and the size of its operations, a sole proprietor may not need general liability insurance since they operate on a smaller scale.

However, if the sole proprietorship regularly involves interactions with third parties, it may be wise to obtain general liability insurance to protect against liability claims.

General liability insurance covers several areas of business risk, including bodily injury, property damage, personal and advertising injury, and medical payments. Here are the details of what is covered:

Bodily Injury: When someone is injured on a business’s property due to negligence or a fault that can be traced back to the company, general liability insurance can help cover related medical expenses. Furthermore, if an injured party decides to sue the company, this policy may cover associated legal fees.

Property Damage: In case of any property damage incurred by third parties due to negligence or wrongful actions by a business, this type of insurance will cover the damages. This includes damage caused when employees work on third-party property or during the transportation of goods.

Personal and Advertising Injury: This covers issues like slander and libel in advertisements and actual physical harm incurred as a result of those efforts, such as emotional distress. While it might not seem a significant issue for small businesses, larger companies can experience significant problems from perceived defamation (primarily through social media).

Medical Payments: Medical payment coverage ensures that anyone injured while on business premises can receive necessary medical care without it being an out-of-pocket cost for them. It usually doesn’t require a settlement or finding of fault – just an accident that occurred or was caused by the business when it happened.

Whether to avoid financial ruin or seek protection from lawsuits, general liability insurance is an important safeguard for your business.

General liability insurance is an essential investment for any business, but many business owners hesitate to purchase it because of the cost.

While the average cost of a general liability policy is between $500 and $1,500 per year, other factors can impact the cost depending on the size and type of your business.

For example, if you run a home-based daycare, you’ll likely pay less than a construction company with multiple employees.

This is because the risks associated with each type of business are different. Small businesses that pose less risk will naturally pay less for insurance coverage.

Factors That Contribute To Costs of Insurance Coverage

Other factors that can contribute to the cost or savings for your coverage include:

– Business revenue: Your insurance premium may be based on your revenue, as more revenues usually indicate higher risk.

– Coverage limits: The higher the liability coverage limits in your policy, the more you’ll pay in premiums.

– Deductible: The amount you must pay out-of-pocket before insurance kicks in can also affect costs.

– Business Location: If you operate in an area prone to natural disasters or high crime levels, you may pay more for coverage.

– Industry-specific considerations: Some industries face more risks than others. For example, a contractor who uses heavy machinery and works at heights will likely have higher premiums due to perceived liability.

It’s crucial to remember that while general liability insurance may seem costly, not having it could be even more expensive.

With the average cost of claims around $50,000 per claim, not having adequate coverage could leave your business in financial ruin.

Now that we’ve explored pricing and other factors affecting costs let’s move on to choosing the right insurance provider. Of course we will be a little biased on this 🙂 but we do offer some crucial insights.

Choosing the right insurance provider is as important as selecting the right coverage level and policy terms.

You need an experienced and knowledgeable provider offering products that cater specifically to your industry and offer fair prices.

As you search for providers and compare their offerings, try to understand how well they understand your business needs.

Here are some good questions to ask:

Do they offer customized coverage plans that fit your unique situation? Do they have experience insuring businesses like yours?

We can’t stress this next point enough!

Some business owners may be tempted to choose the cheapest insurance option available, but this isn’t always the smartest choice.

We have multiple business owners come to us daily because they bought an insurance policy only on cost factors, and now, as they try to scale their business, they realize that that policy can’t scale with them.

While it’s understandable that you want to save on insurance costs, you must also consider other factors.

For example, does the policy have adequate coverage limits to protect you in case of significant liabilities? Is there a high deductible? Are there exclusions or limitations in the policy?

Choosing an insurance provider is similar to selecting any other type of business partner or vendor.

You want someone who understands your needs, can provide reliable service, and has a good reputation within your industry.

Consider speaking to other business owners in your network about their experiences with different providers. Also, check out online reviews from reputable sources like the Better Business Bureau or Google.

Finding the right policy and provider takes time and effort, but it’s an essential investment that will pay off in the long run if disaster strikes.

You can find comprehensive coverage at a competitive price point by working with an experienced commercial agent from The Allen Thomas Group who understands your needs and risk factors.