What Is General Liability Insurance?

Name: ALLCHOICE Insurance
Price range: $

General Liability Insurance is an essential coverage that shields businesses from liabilities such as customer injuries, property damage, and advertising errors. This type of insurance is critical to prevent devastating financial consequences in the face of legal claims. In this article, we’ll navigate through the specifics of general liability insurance, helping business owners understand its vital role and what incidents are covered under this form of protection.

Home > General Liability Insurance Education > What Is General Liability Insurance

Commercial General Liability Insurance - Key Takeaways

General liability insurance is crucial for any business, covering third-party injuries, property damage, and personal and advertising injuries, but it does not cover intentional acts, employee injuries, or auto accidents.
The cost of general liability insurance is influenced by factors such as the nature of the business, size, risk levels, geographical location, and claims history, with the potential for costs to be minimized through risk management and bundling policies.
For comprehensive business coverage, additional policies such as professional liability, commercial property, and workers’ compensation insurance are necessary and should be considered alongside general liability insurance.

Defining General Liability Insurance

In the world of business, you will often encounter the term “general liability insurance.” But what does it mean? In simple terms, general liability insurance is a type of coverage that protects businesses if they’re accused of causing a third-party injury, damaging property, or harming reputation. Acting as a crucial safety net, it shields businesses against hefty financial losses stemming from lawsuits and lays the groundwork for their insurance plan.

No matter the nature or scale of your business, general liability insurance is indispensable. It helps cover costs arising from a variety of accidental and injurious situations, as well as damages to reputation. From paying others’ medical bills to covering legal expenses up to the policy’s limits, general liability insurance offers a broad spectrum of financial and legal benefits, making it essential to understand what general liability insurance cover entails.

Key Components

A general liability insurance policy is like an umbrella that covers three primary areas: bodily injury, property damage, and personal and advertising injury. Imagine a customer slipping on a wet floor in your store or a product malfunctioning and causing damage to a client’s property. These are examples of bodily injuries and property damage that can occur on your business premises, and they are covered by general liability insurance.

Conversely, personal and advertising injury liability, an integral part of a Commercial General Liability insurance policy, safeguards against non-physical damages. Think of scenarios such as a disparaging comment about a competitor in an advertisement or a social media post that infringes on someone else’s copyright. These are types of personal and advertising injuries that your business could potentially be liable for.

Purpose and Benefits

So, what makes general liability insurance a worthwhile investment for businesses? One of the primary benefits of general liability insurance is the financial protection it delivers. Moreover, it encompasses legal defense costs, vital for defending a business against claims. Think of it as a buffer that protects businesses from the high expenses associated with lawsuits and legal claims.

In addition, general liability insurance offers peace of mind to both business owners and their clients. It ensures that the business can survive financially through lawsuits and continue its operations, thus enhancing customer satisfaction. What’s more, general liability insurance is adaptable, simplifying the inclusion of additional insured individuals to the policy as a business grows or requirements change.

You can read more of our blogs about General Liability Insurance for more information.

DID YOU KNOW? General liability insurance not only covers bodily injuries and property damage but also extends to personal and advertising injuries. This means it can protect your business from lawsuits over copyright infringement, libel, or slander, which are increasingly common in the digital age.

Coverage Details: What General Liability Insurance Covers

Having clarified the concept of general liability insurance and its key components, let’s further explore its coverage. General liability insurance helps cover legal defense costs and settlements for covered claims, thereby providing financial protection for your business. It protects businesses against claims arising from bodily injury or property damage due to business operations, products, or completed work.

Whether a customer suffers an injury on your business premises or through interaction with your business or employees, business liability insurance, also known as general liability insurance, covers the legal costs and settlement costs associated with third-party property damage and bodily injuries. Moreover, it extends to personal and advertising injuries, covering legal expenses and damages from lawsuits over copyright infringement, libel, or slander.

On-Premises Incidents

Accidents can occur anywhere, and businesses are no exception. General liability insurance provides coverage for accidents that occur on your business premises. Common incidents like slips, trips, and falls are covered by general liability insurance.

Consider a scenario where a non-employee suffers an injury due to operations on your business premises, in such cases, Coverage C offers no-fault coverage for their medical expenses. This not only takes care of the injured party’s medical bills but also showcases your company’s sense of responsibility, further strengthening your business reputation.

Off-Premises Operations

What about incidents that occur away from your business premises? Here’s where off-premises operations coverage comes into play. General liability insurance includes coverage for liability claims originating from a business’s products or completed operations that occur away from the business location.

Manufacturers, retailers, contractors, and service providers particularly need this coverage due to potential claims stemming from harmful or damaging products, or work conducted off-site. To be covered under off-premises operations insurance, a claim must be related to the business’s products or services, with the incident occurring after the product or service has been provided, and it must involve bodily injury or property damage.

Personal and Advertising Injury

Personal and advertising injury coverage is another important aspect of general liability insurance. It protects against claims alleging harm to a person’s reputation or rights, stemming from a business’s advertising or related activities. The coverage includes protection against claims of:

Libel
Slander
Wrongful eviction
False arrest
Invasion of privacy

Advertising injury protection extends to the following offenses:

Copyright infringement
Misappropriation of ideas or style of doing business
Negligence, misrepresentation, or inaccurate advice that may lead to personal injury claims

These offenses are covered under liability insurance. Despite the complexity of these exclusions, comprehending them is vital for businesses to ascertain their complete protection.

Limitations: What General Liability Insurance Does Not Cover

Despite the significant coverage offered by general liability insurance, acknowledging its limitations is crucial. For instance, contractual liabilities that a business assumes through an agreement are not covered under general liability insurance. Likewise, liabilities related to liquor when the business includes the manufacture, sale, service, or furnishing of alcohol are not covered by liability coverage.

Environmental pollution claims related to business operations are also excluded from general liability insurance coverage. Other exclusions under general liability insurance include:

Damage occurring while completing a service
Damage to the product itself
Impaired property
Product recalls
Errors in advertising

Intentional Acts and Illegal Activities

The design of insurance is to shield you from unforeseen events, not deliberate actions or illicit activities. This is why general liability insurance does not cover damages or injuries that are either expected or intended from intentional acts. Coverage for personal and advertising injury is void when it involves a purposeful violation of laws, knowingly publishing false information or criminal activities.

Moreover, self-inflicted injuries by customers or third parties are not covered under general liability insurance policies. Similarly, incidents where an employee or manager intentionally harms a customer are typically excluded from general liability insurance coverage.

Employee Injuries and Auto Accidents

A prevalent misconception is the belief that general liability insurance encompasses employee injuries and auto accidents. In reality, employee injuries on the job are not covered by general liability insurance but should be covered under worker’s compensation insurance. Similarly, incidents involving company-owned vehicles require commercial auto insurance, which provides coverage for property damage and bodily injury claims resulting from auto accidents.

Hence, for comprehensive coverage, businesses must procure both workers’ compensation insurance for employee injuries and commercial auto insurance for auto accidents, since these are not included in general liability insurance.

Cost Factors: Understanding the Pricing of General Liability Insurance

Several factors influence the cost of general liability insurance, including:

The nature of the business
Specific operations
Geographical location
Employee count
Past claims

Premiums for general liability insurance can vary widely, with median costs around $42 per month. Lower rates start at $11 per month for low-risk businesses, and specific professions, like yoga teachers, may pay as low as $15 monthly.

The specifics of the policy, such as coverage limits and deductibles, also play a significant role in determining insurance costs. Here are some ways businesses can potentially lower their insurance costs:

Implement risk management measures
Maintain a clean claims history
Bundle multiple policies
Choose to pay premiums annually

Business Size and Risk Level

The scale and risk profile of a business notably impact the costs of general liability insurance. For small businesses, general liability insurance costs average approximately $30 a month, with 95% of owners paying below $50 per month, although annual premiums can range from $360 to over $4,000 depending on coverage levels.

A business with a history of multiple lawsuits or operational errors is likely to see higher premium charges. Even the physical location of your business can influence premium pricing, as risks associated with the location are factored into the cost assessments. To reduce their premiums, businesses can improve workplace safety and install fire suppression systems.

Policy Limits and Deductibles

Two key elements that affect the cost of general liability insurance are policy limits and deductibles. Coverage limits, such as per-occurrence limits and aggregate limits, are instrumental in determining the cost of general liability insurance. The per-occurrence limit is the maximum amount the insurance company will pay for a single claim, and higher limits typically result in higher premiums.

Aggregate limits cap the total amount the insurer will pay for losses during a policy period, including a separate cap for products-completed operations coverage. Meanwhile, choosing a higher deductible, which is the amount a business pays out for an insured loss before insurance coverage takes effect, can lower insurance premiums.

Additional Insurance Policies to Consider

Although general liability insurance forms a pivotal part of a comprehensive insurance plan, it doesn’t cover all aspects. There are additional insurance policies that businesses should consider. A Business Owner’s Policy (BOP) combines several coverages essential for business owners into one convenient package, typically including general liability, commercial property, and business income insurance.

Another crucial policy is professional liability insurance, also known as errors and omissions insurance, which protects against negligence claims and alleged mistakes in service delivery. For businesses that rely heavily on data, data breach insurance, also referred to as cyber insurance, is becoming increasingly imperative, providing critical support to businesses in managing the risks and impacts of data security breaches.

Professional Liability Insurance

Professional Liability Insurance, synonymous with errors and omissions (E&O) insurance, protects against claims of mistakes in professional services. It provides coverage for legal defense costs and lawsuits alleging mistakes in the professional services provided by a business.

The cost of professional liability insurance varies based on factors such as:

Coverage limits
Business type
Location
Size
Number of employees
Years in business
Prior claims history

An occurrence policy ensures losses are covered during the policy period, even if claims are reported after the policy has expired.

Commercial Property Insurance

Commercial property insurance is a type of business insurance that businesses should consider. This insurance is designed to cover business property against perils such as fire, theft, and natural disasters. Assets covered by commercial property insurance can include the building itself, office equipment, inventory, fences, landscaping, and exterior signs.

However, it’s important to note that commercial property insurance usually requires separate policies for earthquake or flood damage. Therefore, when determining coverage needs, businesses should take an inventory of their physical assets to help establish replacement values and coverage levels.

How to Choose the Right General Liability Insurance Policy

Selecting the appropriate general liability insurance policy can seem overwhelming. However, with the right guidance, it’s a manageable process. Here are some tips to help you:

Ensure that the cost of the general liability insurance aligns with the income generated by each employee.
Make sure that both insurance premiums and deductibles are manageable for your business.
Prioritize the quality of coverage in an insurance policy over the cost, to avoid missing out on important protections that the business may require.

Annually reassess your general liability insurance needs to ensure that the policy aligns with your business operations’ current scale and risk profile. Look for scalable insurance plans that can grow with your business and always compare quotes from multiple insurance providers to find the best price and coverage for your specific needs.

Comparing Quotes

Prior to obtaining quotes, it’s essential to study various insurance types and scrutinize providers’ financial ratings for better market understanding. To accurately compare general liability insurance rates, request quotes from multiple providers, providing consistent information to each.

To analyze all received quotes and identify the true price range and best value offering for the required insurance coverage, follow these steps:

Discard outliers that are significantly higher or lower than the rest of the quotes.
Consider the expertise and knowledge of insurance agents who are familiar with the state’s regulations and specific industries.
Seek tailored advice from insurance agents to help interpret the differences among various quotes.

Customizing Coverage

Tailoring your insurance policy guarantees that it caters to your business’s distinct risks and needs. To tailor a general liability insurance policy to the specific needs and risk factors of a business, collaboration with experienced insurance experts is essential.

A customized insurance policy must take into account unique risks, even less common ones such as theft by employees or damage due to non-standard issues like water line breaks. This way, small business owners can ensure that their businesses are fully covered, providing them with peace of mind.

General Liability Insurance Quote

SERVE. EDUCATE. PROTECT.