General Liability Insurance
Protect your business from claims of injury or property damage with general liability insurance.
General business liability coverage protects your assets and pays for obligations such as medical costs if someone gets hurt while he or she is on your property or if you or any of your employees caused injury to someone. Also, it would cover the cost of a lawyer and any settlements awarded if you are successfully sued. If you are a tenant, it will take care of the cost of property damage caused by fire and any other contingencies covered in the policy. Finally, this type of insurance would protect you against claims of misleading or false advertising. This includes libel, slander and copyright infringement.
Who Needs General Liability Coverage for their Business?
It truly would be a dangerous risk to fail to purchase this type of insurance. However, there are some businesses that are better candidates than others. Here are some of the best candidates for general liability coverage:
- Businesses that have contact with clients, either at their offices or their customer’s place of work. Examples of such businesses include lawyers, accountants, chiropractors and therapists.
- Businesses that have access to property or equipment belonging to the client; including computers, which makes IT professionals particularly in need of insurance coverage. Jewelers who do watch and other jewelry repairs as well as specialty electronics repair shops are also especially in need of coverage in the event that there are concerns about the work they perform.
- If you ever represent your client’s business in any way, including for legal or accounting purposes.
- If you ever use outside or third-party locations for any of your business activities.
- If you plan to enter into any type of contract with your client. Construction companies, handyman businesses and small moving companies fall into this category.
What A Reputable Liability Coverage Provider Can Do For You And Your Business
As a business owner, you are very aware of your cash flow, and you know that adding yet another payment can feel very overwhelming. For that reason, most general liability insurance companies will allow you to pay on a monthly basis, thus distributing the sting of the cost over the entire year. Your provider will also customize your policy to meet your business’s unique needs.
What Are Your Coverage Needs?
Figuring out the extent of the coverage you need depends on what type of business you have and the risks associated with it. For example, a roofer would need significantly more coverage than would a software design firm. If your risk is relatively low, a Business Owner’s Policy (BOP), which combines general liability with property coverage, might be perfectly adequate. When in doubt, speak to an agent, providing accurate details about the size, scope and services your business provides in order to get the best coverage.
How Does General Liability Insurance Work?
Depending on your policy, you will have a set dollar amount of coverage that is allotted to you. If an incident occurs that is covered under your policy, your insurance provider will cover the costs up to the set dollar amount of coverage that you have taken out. Any additional costs will fall on you to cover. Remember, you can always purchase an umbrella policy that will increase your coverage limits if you are on the high end of the risk continuum.
Here are just a few examples of the types of lawsuits and their associated costs that general liability insurance protects you against:
Property Damage Lawsuit
- You are a general contractor who is installing a new bathroom in someone’s home. One of your employees forgets to turn the water off, resulting in a huge flood that swamps the customer’s finished basement and damages several expensive pieces of furniture. The customer sues you for $150,000 in damages to their home.
- You are an accountant who is in the business of helping clients with IRS matters. While one of your clients is in the process of bringing his tax information to you, he slips and falls on your icy front steps. In addition to hurt pride, the client sustains a shattered ankle that eventually requires major surgery and several weeks of convalescence during which he cannot run his restaurant. He sues your business for medical expenses and lost wages to the tune of $120,000.
Customer Injury Lawsuit
- You run a busy restaurant. One of your employees leaves the floors wet after mopping them and fails to put up a sign warning patrons about the danger. A woman slips in the water, breaking her wrist. She sues your establishment for $50,000 in medical expenses.
Product Liability Lawsuit
- You own a sporting goods store that sells exercise equipment. When one of the treadmills that you sold malfunctions, your customer falls off of the machine and hits his head, sustaining serious and permanent head injuries. You are sued for $500,000 in medical expenses and pain and suffering.
It should be noted that general liability insurance is not comprehensive; there are things it does not cover. One is negligence, even if the incident was not your fault or that of any of your employees. For this reason, many entrepreneurs purchase additional policies to address this gap. These include professional liability insurance that covers someone’s claims against you if you provide personal or professional services, or a business owner’s policy that combines general liability coverage with property insurance.
Filing A Claim
As soon as a potentially claimable incident happens, contact your agent or insurance company right away. Explain the event in detail, including names of witnesses, time and date and any other pertinent information. The sooner you document the incident, the fresher your memory will be and the easier it will be for your agent to represent you.
Is This Coverage All I Need?
Although obtaining this kind of insurance is sufficient for most companies, you will generally need other types of coverage as well. Most states mandate that you also provide workers’ compensation and disability insurance for your employees. Furthermore, depending on what type of business you have, you might also be required to have automobile, alcohol and product liability, home business and even environmental and pollution coverage. Check with your state to see exactly what you should have.
When you apply to receive a general liability insurance policy, the company uses a process known as underwriting in order to assess your eligibility for coverage. Factors such as your level of risk and the measures you have taken to protect yourself against it are considered. The job of the underwriter is to use risk and exposure data to prove that you are an acceptable risk and that chances are good that you will not incur a loss.
In order to accomplish this goal, the underwriter will assign you to an insurance risk class after examining your individual situation. If you are a “preferred” client, you will receive a lower rate because your risk is below average. A “standard” customer will be charged the regular rate since they are at a typical level of risk. If you are in the “rated” class, your level of risk is above average, and you will be charged higher premiums as a result.
You might be temporarily placed in the “postponed” category if more information needs to be obtained, until a set time has passed or until relevant factors have changed. Your case will then be re-evaluated and re-categorized according to your updated situation. If your level of risk is too high, the company will put you in the “declined” status, in which case you will need to wait at least two years before that particular insurer will reconsider your case.
The underwriting process has several steps. First, the underwriter will need to collect information that will help them to determine your level of risk. This includes gathering data about the nature of your business operations: your hours, previous violations, size of business, previous bankruptcies and the presence of attractive nuisances such as a swimming pool or playground. In addition, they will look at your management competency in terms of credit and bill payment history, health violations and liens.
The premises will be examined for potential risk factors such as observed hazards. The neighborhood surrounding your place of business will also be investigated, with special attention devoted to the crime rate and whether instances of this type of activity are trending upwards or downwards.
Typical Range Of Rates
Because general liability insurance is the cornerstone of your coverage, it always needs to be considered first and foremost when you are reviewing your coverage needs. What you will pay for general liability insurance depends on the amount of risk that your business poses for the insurer. Factors that will be focused upon include:
- The industry you are working in (hospitality, consulting, retail or professional).
- How long you have been in business.
- The number of customers you have.
- Your annual revenue.
- Your history of filing claims
The following estimated costs pertain to a $1 million general liability policy:
- Barber shop/hair salon: $450 per year
- Satellite dish installer: $550 per year
- Computer repair service: $400 per year
- Small retail store: $750 per year
In the examples above, the retail store has the most expensive premiums by far. This is because it generates more customer traffic and thereby has a higher level of exposure to risk than the other types of businesses.
State Regulations And Minimums
Because each state can determine its own regulations when it comes to general liability insurance minimums and other factors, you should never purchase a policy without first checking to be sure that it is in compliance. A knowledgeable agent should know exactly what you need and be an expert on the requirements for all areas within their jurisdiction. When in doubt, there may be industry-specific trade publications that can provide you with the information you need.
What To Look For When Comparing General Liability Insurance Quotes
Before you speak to an agent, take some time to determine your level of risk to the best of your ability. Do you use expensive machinery? Do you have commercial vehicles? Do you have employees? Is there anything about your property or the surrounding neighborhood that would potentially lead to an increased risk of accidents or disasters? Do you give advice to clients or manufacture products that could cause injury?
Truthful answers to all of these questions can give you and your insurance agent a realistic picture of your needs so that the policy you receive covers you adequately.Also, keep the following factors in mind:
- Not all brokers are created equal. Depending on the industry in which you work, you may even be able to find an agent with specific expertise in your type of work who can provide you with a targeted policy that is often called a program. Also, be sure the broker you choose has good working relationships with several well-established underwriters. After all, it is the underwriter who will bring your policy to market.
- You can often save money by purchasing your general liability coverage in a bundle. Rather than getting individual policies from several companies, combining them into one can save you money and consolidate your paperwork. As you work to combine your various types of coverage, never lose sight of the need to protect your business assets in order to protect against theft or property damage. Just keep in mind that most business owner’s policies (BOPs) don’t cover specialized policies such as errors and omissions.
- Don’t go with the first quote you receive. Types of policies as well as prices can vary widely, so be sure to explore several options before making your final decision. If you are happy with your current insurer but are hoping to get a cheaper price elsewhere, ask your agent if you can take advantage of any discounts. Most companies would rather keep a loyal customer than lose them to their competition. It never hurts to ask.
- Do your research. Look at data from other businesses in your industry, paying particular attention to information about recent legal actions and settlements. This will help you to get a good idea of how much insurance to purchase for your own business.
- Find an insurer who can grow with you. Although your business may be small today, it is wise to project your goals into the future. Ask yourself where you will realistically be one, three, five and even ten years into the future. Does your insurer have what it takes to grow as your business evolves? If you have any doubts, it might be a good idea to look elsewhere.
Tips For Keeping Costs Low And Reducing Risk
No matter how hard you try, you will never be able to reduce your general liability insurance costs to zero. However, there are steps you can take to keep more of your money in your pocket while lowering your risk.
Purchase your coverage in bundles by getting a business owner’s policy (BOP). Although you may still need to add specialized policies, this will cover your general needs – and at a reduced cost. Most BOPS contain business interruption coverage, property insurance, crime insurance, liability insurance, vehicle coverage and flood insurance. Additional events can also be covered at extra cost.
Pay your entire premium cost up front. Many companies offer a discount if you pay this cost in full at the start. And be proactive when it comes to your risks. If you reduce them, you will also reduce the number of claims you file and begin to create a record that will eventually lead to lower premiums.
Ways to do this include providing regular training sessions for staff regarding safety; buying and using a security system; adopting a policy regulating website passwords, social media and other computer-related risks; and minimizing workplace hazards; and creating checklists that pertain to safety and security procedures.
Frequently Asked Questions About General Liability Coverage
How long will it take to go into effect?
The importance of discussing this with your agent before signing the contract cannot be overstated. Some policies go into effect at the very moment you sign the contract and the agent has given you their word; others require that you wait until the policy has been delivered and have made your first premium payment. If you need to prove that you have general liability coverage for the purposes of signing a business contract, many agents can provide you with a document proving that you have been accepted for coverage via email immediately after you purchase the policy.
Are my personal assets covered under general liability insurance?
In most cases, your personal property is protected by your homeowners policy. Be sure, however, that your policy has a clause specifying that your property is covered both on and off the premises. If your current policy does not have such a stipulation, you will need to contact your agent and add it.
What is umbrella insurance?
This refers to extra coverage that helps to protect you against major claims and lawsuits. It does so by providing additional coverage that goes above and beyond your general liability policy. Furthermore, it often protects you against events that are not included in your regular liability policy such as slander, libel and false arrest and covers the cost of your legal fees. Your umbrella policy will kick in if you are found libel and are required to pay damages or if you are sued and need to pay for your defense. It will support you even if you are not found responsible. Your umbrella policy only applies after the limits of your basic coverage have been exhausted or if the claim is not covered under your primary insurance. Because they are more comprehensive in their coverage, umbrella policies can provide you with peace of mind that you would not get from standard insurance because they protect your assets from catastrophic loss due to lawsuits. Expect to pay around $150 to $200 for a $1 million policy, an expense that could pay for itself many times over if the worst should happen.
Where can I buy general liability insurance?
Many companies provide this coverage, which gives you the opportunity to make comparisons among several different options. It is recommended that you don’t choose the first one that comes along. Furthermore, while it is tempting to automatically pick the coverage that costs the least, that isn’t always your best course. Instead, look carefully at what is included as well as what is not. Take your particular business needs into consideration, asking yourself what you absolutely need and what elements you can afford to do without.
Is there a ballpark figure for the amount of general liability insurance I should buy for my business?
While each business owner needs to carefully review their company’s unique needs, a general rule is that most small businesses can start with anywhere from $1 to $2 million worth of general liability coverage that would protect you against the costs of lawsuits and other expenses.
Can I cancel my policy if I need to do so?
The short answer is “yes,” but doing so may have consequences. If you have a history of starting and stopping your coverage, it is very likely that your premiums will be higher.
Can I get additional insurance coverage later if I need it?
Once you have a policy, it is a simple matter to augment your coverage. All you need to do is to contact your agent and modify your policy. Just be aware that your premium costs will rise.
Property damage or personal injury can happen at any time and can cause devastating harm to your financial future. That’s why it is vital that you obtain general liability coverage for your business. Make this crucial investment in your company, and you can rest assured that you will be protected if disaster ever strikes.
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