One of the most important steps you will ever take as a business owner is ensuring you have the right insurance policies in place. And most entrepreneurs will tell you that commercial general liability insurance, also known as business liability insurance coverage, could be the best investment you ever make to protect your business for lawsuits or any type of legal issues.
If you aren’t sure what general liability insurance covers, it is basically a blanket insurance policy that protects you and your business against any injuries or damages for which your business can be held liable.
Below, we’ll discuss everything you need to know about commercial liability coverage, including exactly what it covers and how it works, the benefits of this type of business insurance policy, how much coverage you need, and the best ways to save money buying business insurance.
What Does Commercial General Liability Insurance Cover?
When buying general business liability insurance, it is critical to know what this type of policy will cover. By understanding these four general liability insurance benefits will help you choose the best policy for your business.
Property Damage Liability
If a client’s property is damaged as an indirect result of something your company or company does, general liability insurance will pay for repairs.
What are the exceptions? General liability insurance will not cover property damage caused by neglect or error, however. If you need insurance that will cover professional mistakes, look for a professional liability policy instead.
Bodily Injury Liability
If you own a cleaning service, and a client or third party slips on a wet floor recently mopped by your company, general liability insurance will cover the medical expenses and treatment of the injured party.
What are the exceptions? General liability insurance will not pay for medical expenses if an employee is injured at work, however. For that, you will need workers’ compensation insurance.
General liability insurance will also cover expenses that arise if someone is injured or property is damaged by a product that you sell. This is especially important if the matter goes to court since legal fees sometimes cost more than the settlement itself.
What are the exceptions? In some situations, product liability also applies to work completed by your company, but the specifics vary by policy. It is always a good idea to check with your insurance broker to understand exactly what your policy covers.
Defamation and Libel Liability
If someone sues you for libel, slander, or advertising injury, your general insurance policy will cover the settlement. Most advertising injury claims are a result of a competitor claiming that something you said or wrote in an advertisement caused them to lose business.
What are the exceptions? The action or occurrence that prompted the claim must have taken place during your coverage period for you to qualify for defamation and libel liability protection.
How Much Insurance Do You Really Need?
How much liability insurance do you need? That will depend on multiple factors:
- How risky is your business?
- How often do injury and damages occur in your line of work?
- How big is your business, including revenue and the number of employees you have?
- Where is your business located?
- How experienced or well-trained are your employees?
- Does your state impose any legal minimums on business insurance?
The higher your risk, the more coverage you should purchase. If, on the other hand, you are in an industry free from most inherent risks, you will be able to save money by paying for more limited coverage.
In general, it is better to err on the side of slightly too much insurance instead of putting your business at risk of being under-insured. Most small businesses need somewhere between $500,000 and $1 million in insurance, depending on the state where you do business. Your state may have a higher or lower minimum requirement — check with the state insurance commission to find out.
In some cases, you may also have a contractual obligation to carry a certain level of coverage. As with all insurance questions, be sure to ask your agent for clarification of your needs.
A word on coverage limits: although a business liability policy will cover any of the claims listed above, most payments are subject to coverage limits.
How To Save Money on A Business Insurance Policy
Getting the right liability insurance can save you hundreds of thousands of dollars if you ever need to file a claim, but many business owners still put off obtaining insurance (or enough insurance) because of the cost.
Instead of exposing your small business to high levels of risk by under-insuring yourself, consider the following ways you can save money on business insurance:
Opt for a Higher Deductible.
By putting aside a little extra money in savings to cover a higher deductible, you may qualify for lower insurance premiums. Although it will require you to be diligent about keeping your deductible in savings, you will find more money in your month-to-month budget if you raise your deductible.
Pay Your Premium Up Front.
Many insurance companies offer a discount for prepayment, enrolling in autopay, or paying the entire premium at one time (as opposed to month-to-month payments).
Check for Discounts
You may qualify for a business insurance discount through a group or trade organization’s group coverage, or you may be able to save by bundling multiple policies together through the same insurance company.
As you can see, business liability insurance is incredibly helpful for all types of businesses. Understanding these benefits will help you choose a good general business liability insurance policy. Many insurance companies can also perform a personalized risk assessment to help you figure out exactly how to reduce your chance of needing to file a claim in the first place.