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If you’re an entrepreneur, contractor or owner of a small business, you need General Liability Insurance - no ifs, ands or buts about it.
When it comes to business insurance, this is the baseline and first type of policy you should purchase. It gives business owners peace of mind in knowing that in the case of an accident - such as someone slipping and falling on their property - their business is protected.
Read on to find out all about it in our comprehensive guide to General Liability Insurance.
On a day to day basis, it’s likely that you and your employees are interacting with many people - such as clients, vendors and contractors, to name a few. Any one of them could experience an injury or loss. If your business is the cause they can file a lawsuit against it.
General Liability Insurance is a business insurance policy that is applicable to most contractors and business owners because it protects them. When a business has this type of insurance policy, they're covered when it comes to claims of bodily injury, associated medical costs and damage to property that occurred as a result of your business operations.
It also covers legal defense costs, along with settlements and judgments should you be successfully sued. If you are a tenant who causes damage to a property that you rent (like, for example, a fire), that’s another situation where under a General Liability Insurance policy, you’d be covered. Lastly, these types of policies cover claims of false or misleading advertising. That could include libel, slander or copyright infringement.
This type of insurance is often referred to as “Business Liability Insurance” or “Commercial Liability Insurance.” Call it whatever you’d like, but just make sure you have this policy in place - because not doing so could prove very costly.
Getting into Details ...
If someone is injured at your business or because of your business, including employees and customers, you are legally liable for their injury, including medical payments. Example: A customer slips in your store, and hurts themselves. He or she requires medical care, and bring a suit against you for the damages.
In the course of doing business, you cause damage to someone else’s property, whether that’s an actual property location (like their building) or simply an item they own. Example: While working as a contractor at your client’s place of business, you accidentally break something and cause costly damage to their facility.
This coverage includes damage resulting from a third-party to property you are a tenant at. Example: While working in a rented offices place one of your employees accidently breaks the door. You as a business owner are going to be liable for the replacement.
An important line of coverage is for manufacturers or those who sell products under their own label. If a customer claims bodily injury or property damage from that product, the Products Completed Operations coverage will provide defense. Example: Your a beauty salon selling your own shampoos to your customer. After using the product the customer is having allergy symptoms and sues you.
This can include false advertising, copyright infringement, libel or slander. Example: One of your employees shares unflattering information about a customer with someone else who works in the same industry. Word gets back to your client that they are being bad-mouthed, and they sue for slander.
Like most insurance plans, this type of policy will clearly outline its limit, or the maximum amount the insurance company will pay against a liability claim. It’s important to assess your risk carefully to ensure you have adequate coverage and won’t be left paying for expenses out of pocket.
Most General Liability insurance policies cover up to 1 million per occurrence and 2 millions in aggregate, if you need additional coverage it is common to double the limits. If you need more than 2 millions per occurrence you most likely have to purchase an umbrella or excess insurance policy.
For example, if your small business is sued for $300,000 in medical costs associated with a slip-and-fall injury, but your policy limit is $250,000, you will have to cover the difference of $50,000 yourself. It is important to research your industry research before investing in a policy.
General Liability Insurance protects your business from 3rd party bodily injury, property damage and personal/advertising injury claims. It is important to note that if you have a customer's property in your possession for servicing, cleaning, repairing or storing (Example: dry cleaner, appliance repair store), coverage for damage to the customer's property will be excluded and will need to be purchased under a commercial property or inland marine policy.
It’s also important to know that this insurance covers the people associated with your business, as well as other businesses. For example, if you have a partnership or joint venture, all of your partners and members would be protected, along with their spouses, if they are sued for something they do as part of their job.
If you own a corporation, this insurance policy will cover all of your executive officers, directors and stockholders while they are acting in an official capacity. It also protects your employees from lawsuits resulting from actions they took on the job.
Those associated with your business don’t necessarily have to be employees, partners or customers to benefit from coverage. These insurance policies also include volunteers for liabilities that result from the work they do for you.
If you work with vendors, like contract salespeople, you may have a written agreement to indemnify a person or organization. Under this type of policy, these people and organizations would be protected against liability claims (like property damage or bodily injury) that happen as a result of selling or distributing your products.
The cost varies. The coverage your business needs depends on the type of business you operate, as well as the perceived risk associated with you or your industry. For example, a marketing consultant would need less coverage than a building contractor. Your location is also important, as some states tend to award more in damages to plaintiffs claiming personal injury than others. If you live in one of those states, you’re likely to face higher premiums.
Generally the insurance company will ask for information before determining your premium, such as:
Minimum premiums start from as little as around $350 per year. However, most annual premiums for small businesses range from $750 to $2,000 depending on your type of work and coverage needs. That’s certainly a lot less than the thousands, if not millions, of dollars you may need to spend fighting your case in court.
In today’s society, lawsuits are increasingly frequent. No matter how small your business is or how unlikely you think it is that you’ll ever face a claim, you’re still exposed to liability risks at work. An insurance policy costs very little when compared to the expenses your business will incur.
Almost every business owner or independent contractor can benefit from having this insurance. However, if you’re still asking if it’s necessary, here are some reasons you might need coverage:
It's easy to get General Liability cover for your business by providing a few simple details about your business, such as location, nature of business and contact details. You can get a quote within minutes with a few clicks of a mouse. If there are any question during the application a personal CoverWallet insurance advisor get in touch with you to discuss the details of your quote.
General Liability Insurance for independent contractors is very much the same as for standard businesses. If you are an independent contractor, it is likely you will be working with customers or clients and this carries the same risks concerning bodily injury and property damage regardless of the field you are working in (from IT to construction). This insurance will also cover you against delays in completing work due to issues such as inclement weather. General Liability Insurance is an important consideration for contractors and many businesses now ask for a Certificate of Insurance before they subcontract work out.
Comprehensive General Liability insurance is another term used for General Liability insurance, albeit one that's not used quite as frequently nowadays. If you see the term Comprehensive General Liability insurance, don't be fooled into thinking this is something distinct from normal General Liability insurance. It's also important to remember that no insurance policy is fully 'comprehensive' as all policies have limits and exclusions to what they will cover. Your insurance carrier will explain to you what these limits and exclusions are.
Liability insurance of some kind is mandatory for most types of business. General Liability Insurance is the most common form opted for by most businesses as it covers against the key risks. You will need this insurance if you have clients or customers at your workspace, if you use third-party locations for business purposes or if you handle a client's equipment. If you are working on a contract, a Certificate of Insurance may be required. Some businesses choose to combine General Liability Insurance with Commercial Property Insurance in a Business Owners Policy.
Your coverage needs will depend on a number of factors. Firstly, your type of business. Some industries are more prone to risks, so for example a building contractor will need more coverage than a web designer. Secondly, the size of your business. A busy restaurant in the city centre will need more coverage than a small rural cafe. Thirdly, your location is a factor as some states tend to award more in damages than others. Most small businesses opt for coverage limits of $1-2 million. If your business is in a low risk category, it might be worth considering the Business Owners Policy.
Your exact insurance premiums will depend on those factors of size and type of your business, location of your business as well as your insurance history. But the typical cost of insuring your business with a limit of one million dollars pay-out is around $1,000 to $3,000 annually. You can choose to lower this limit, which you may want to do if your business is very small or low-risk. Or you may wish to increase this limit or purchase excess or umbrella insurance if you feel that a $1 million is not sufficient to cover your risks.
In contrast to a general awareness General Liability Insurance is not an all risk insurance policy. While this insurance offers broad protection for your business, it doesn’t cover absolutely everything.
The directors and officers of a privately-held company are at risk from suits by different people, such as customers, competitors, suppliers and government agencies. However, the greatest number of lawsuits against directors and officers come from the employees of a company itself. D&O Insurance covers your management team, should things go south.
EPLI is a liability insurance that covers wrongful acts, such as wrongful termination, discrimination, sexual harassment and retaliation. This insurance may also protect your business from other employee-related claims, such as deprivation of a career opportunity, defamation, invasion of privacy, failure to promote, and negligent evaluation.
This insurance protects goods in transit on land, as well as the property of others that is on your premises or being transported from your premises. An Inland Marine policy is crucial if your business ships goods of any kind on land.
This insurance covers a business should they need to recall one of their products. Product Recall Insurance will cover the cost of getting a defective product back under the control of the manufacturer or merchandiser that would be held responsible for bodily injury or property damage due to the existence of the product.
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