Can I Get Liability Insurance Without A Business License?

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At its essence, general liability insurance assists in the coverage of the immense costs that come up when a claim is filed against your business. It minimizes the impact on you, the business, your physical property, and your employees. Without general liability insurance, your business is at the risk of default. This is because your out-of-pocket costs are immense. They include settlement payments, court fees, and costs connected to legal services.

Liability Insurance and Licenses

Most states require you to obtain general liability insurance for your company. Additionally, many insurers ask for a business license to provide you with a policy. This begs the question if liability insurance is attainable if you don't have a business license.

General Liability Insurance Coverage

What is general liability insurance coverage? Its scope handles a variety of situations. Below are five of the key risks covered under a general liability policy, together with corresponding general liability lawsuit examples:

1. Third-party bodily injury

This occurs when a customer slips, trips, or falls within the bounds of your business. If they consider their injuries worthy, they sue your organization. General liability covers bodily injury to pay for their medical bills.

2. Third-party property damage

If you or your employees cause damage to a customer's property in the act of business, your organization faces a suit concerning the damage. A clause in your general liability policy assists in repair or replacement costs.

3. Reputational harm

Someone, be it a customer or a competitor, sues your business for slander or libel. This is related to something allegedly said by you or an employee. In this situation, general liability insurance covers the costs associated with a legal defense.

4. Advertising harm

Another company or an individual has the right to sue your business if they feel you're involved in copyright infringement. For instance, using a photo for promotional needs without the right permissions. Similar to reputational harm, liability insurance handles legal costs.

5. Class codes

The above items are basic titles for coverages handled by general liability insurance. Each is broken down into a subset of business insurance general liability class codes. When an insurer reviews your claim request, they consider these details to determine where the coverage falls.

What General Liability Insurance Does Not Cover

Though general liability is comprehensive, it doesn't cover all issues. The items listed below require the purchase of additional policies to minimize cost impacts.

Workers' compensation

A general liability policy doesn't cover injuries or illnesses your employees incur in the workplace. Hence, the reason to purchase workers' compensation insurance. This policy helps pay for their medical expenses, ongoing care costs, and potential legal fees.

Commercial property insurance

Damage to your own business isn't covered under general liability. To avoid paying for repairs and replacements out-of-pocket, you need to purchase a commercial property policy.

Professional liability insurance

If you or your employees provide information or guidance to customers, they can sue you in turn. This occurs when you either make a mistake or they feel the advice you provide causes further issues. To protect your company, you need professional liability insurance to mitigate costs.

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What Is a Business License?

Simply put, a business license represents the legal registration of your company and its services. Approval permits you to not only operate but also provide services in a designated region. This can be a local community or within the state as a whole. The lack of a business license results in fines, warnings, and requests to close from the local authorities.

Applying for a business license

City and county governments have the license application available online or through an in-person visit. In certain situations, you're asked to file your organization at the state and federal levels as well. Regardless, licensing and filing fees are normally connected to an application.

License approval

Once approved, your business license and subsequent ID number let customers know you are compliant with government regulations. In turn, you're entitled to any protections offered by them. Additionally, an approved business license allows you to purchase general business liability insurance.

Can You Purchase Liability Insurance With No Business License?

The simple answer to this question is yes. The more complex response is it depends on the type of business as well as your jurisdiction.

Business type

If you are a sole proprietor of your company, you don't necessarily require a license to obtain a liability insurance certificate. At this point in entrepreneurship, you're the only person in your company. Thus, an insurer should provide you with the necessary coverage.

The same goes if you have established a limited liability company (LLC) connected to your business. This is a level below a business license. You are still registered with the state where your company resides. However, you normally don't require items like commercial insurance or tax breaks.

Liability coverage in a sole proprietorship versus an LLC

When you establish an LLC, you receive a form of liability protection not related to insurance. Depending on your state's shield laws, you're protected from some or all responsibility for acts and debts of the LLC. This doesn't happen if the onus of blame is put on you as a sole proprietor. In either case, general liability insurance is a must to cover potential fees and settlements.

State regulations

Whether or not you can purchase a general business liability insurance policy with no business license depends on the regulations of your jurisdiction. Again, if you're a sole proprietorship or LLC, city or county governments might not require it. This is especially true if you don't have a brick-and-mortar business or employees.

On the other hand, if you run a real or virtual storefront business with employees that provide goods and services, then a business license is a must. It's the only way you can legally operate and avoid fines. Plus, it permits you to purchase additional policies for workers' compensation and your commercial property.

How Do You Know If You Need a Business License to Get Insurance?

The best thing to do is contact one of our agents. They have the research tools needed to help determine if your business requires a license to proceed with a policy. Additionally, they help you determine the liability insurance minimum you need with or without the official approval of your state or county.

In the end, don't go without any insurance if you can't get a business license. Contact our CoverWallet agents for more information on your best course of action and how much your liability insurance small business cost will be. It will keep your business going if liability problems arise.

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