What Is Commercial General Liability Insurance?

Are you in the market for a commercial general liability insurance policy?

That’s a smart decision!

Your business faces a myriad of liability risks. Your product could malfunction and cause injury to a user or a customer could slip and fall on your premises. Both incidents will lead to a liability claim or lawsuit.

Such liability claims can have devastating consequences on your businesss reputation and finances. Having adequate general liability coverage might not do much for your reputation, but it will help soften the financial blow.

Read on for finer details on how this crucial type of business insurance is a must-have.

What Does Commercial General Liability Insurance Cover?

Despite its name, general liability insurance doesn’t cover all liability risks. General liability insurance primarily covers bodily injury and property damage claims resulting from your businesss products or operations.

To illustrate, lets say you run a carpentry business. A customer comes in to order a sofa. Unfortunately, a piece of woodworking equipment that wasnt properly secured falls on them and injures their feet.

Yes, its an accident and the equipment could as well have fallen on you, but one fact doesnt change: your business is at-fault.

The customer will need to seek medical attention for their injuries. Next, they will pursue a compensation claim.

Your business will have to reimburse them for their medical expenses and other economic damages. The customer can also pursue compensation for non-economic damage, such as emotional trauma.

Without general liability insurance, your business will settle the claim out-of-pocket. You can deny it, of course, but the customer will likely file a lawsuit. This will only increase your costs.

However, with adequate liability coverage, your insurance provider will settle it. In fact, the claimant will mostly deal with your insurer. This ensures you have ample time to focus on running your business.

What General Liability Insurance Doesnt Cover

Although general liability insurance for businesses covers a wide array of risks and claims, there are others it doesnt. These include employee injuries and commercial vehicle accident claims. Poor workmanship claims, intentional acts, and injuries/damages arising from professional service mistakes are also not covered.

In most cases, there are separate insurance policies for the risks that general liability insurance doesnt cover.

Workmans compensation insurance covers workplace injury compensation claims. Professional liability insurance covers malpractice claims (such as medical injuries). And commercial vehicle insurance covers auto accidents for business vehicles.

That being said, keep in mind that policy terms and conditions vary from insurer to insurer. Its possible that some insurers general liability policies cover events that are generally not covered. Or you may be able to buy add-ons to widen the scope of your policys coverage.

Be sure to read the fine print and ensure you have a clear picture of what the policy youre about to buy will cover. You dont want nasty surprises when youre hit with claims you supposedly thought your policy covered.

Things to Consider When Buying a General Liability Policy for Your Business

Commercial general liability policies arent created equal. Its your responsibility to research the market and find a policy that best suits your business.

These are the key things to consider when out shopping:

Type/Nature of Your Business

Ecommerce stores and woodworking shops both require general liability insurance. But since they face different types of risks, their policies must be designed to cater to their specific needs. Thankfully, most insurance companies offer custom policies, or are willing to customize their policies to better suit the nature of your business.

If youre an online store, for instance, theres no point in having a policy with a premises liability clause if your business doesnt have any commercial space. Theres zero risk of customer accidents on-site.

Your Budget

On average, businesses spend about $800 per year on about $2 million worth of general liability coverage. Premiums are affordable, but that doesnt mean you shouldnt have a budget. Depending on the needs and nature of your business, your coverage needs might increase, thus increasing your premiums.

If youre on a shoestring budget, there are insurance companies that offer these policies on an as-needed basis. For instance, you can find hourly basis carpenter insurance. You can purchase it just before starting work on a clients site and only lasts for the duration of the project.

Reputation of the Insurance Company

Insurance companies are in business to make a profit. Although they have to pay out valid claims, they typically find ways to pay as little as possible.

Thats okay, but some insurers dont honor claims on time and others engage in cat and mouse games with claimants. Remember, nothing stops a claimant from suing your business if your liability coverage provider is proving difficult to deal with.

You dont want that. It hurts your businesss reputation and can expose you to financial losses.

As such, evaluate the reputation of an insurance company before giving it business. Does it have a good record of paying out claims?

Youll do your part in paying premiums. You want an insurer that plays its part when required as well.

Protect Your Small Business Without Liability Coverage

Commercial general liability insurance is one of the many types of business insurance, and its a must-have.

On any given day, your business is exposed to various liability risks that could kill your business. Getting liability coverage is a good start, but dont go for bare minimum coverage. Buy coverage that adequately protects your business.

There’s more helpful content in the business section of our blog. Read to your fill.