Commercial general liability insurance (CGLI) can keep your business afloat during claims related to third-party injuries, property damage, and unexpected lawsuits, which may result in bankruptcy. The policy not only provides liability protection from third parties but also adds value to small businesses.
Many business owners wonder if they really need liability insurance. They don’t understand CGLI entirely, and this lack of knowledge is detrimental for their company’s survival. Having general liability insurance can impact a small business’ reputation positively.
What Do You Gain from Purchasing General Liability Insurance?
Here’s a list of pros that come with a general liability policy:
Increases client contracts: Clients don’t want to be liable for your mistakes. Having general liability insurance will ensure higher safety standards for your business. Therefore, this will encourage trust between the client and your business.
Demonstrates responsibility: In cases of accidents that occur on the job that didn’t occur due to the fault or negligence of the business, your business will be liable to pay for the damages. Therefore, having CGLI demonstrates that you have yours and your client’s best interests in mind.
Establishes trust: Having CGLI implies that you are serious about the job and the risks associated with it. It reinforces trust and shows that you are not willing to risk your business’s future.
Why Do You Need General Liability Insurance?
As a business owner, you may be legally responsible for any bodily or property damage to third parties visiting your business. You have to make sure your business stays protected against risks of accidents.
Suppose you run a photography business, and your camera equipment gets knocked into the venue wall, damaging it. The venue owner can make you pay for the cost of repairing the wall or worst-case scenario; can sue you for property damage.
You won’t get in legal trouble for not getting CGLI, but it offers reassurance to your clients. Liability claims are common and can get expensive for any small business. Having CGLI will help you protect your business from liability claims alleging:
When a property comes to harm due to your company’s negligence, the owner can sue you. Commercial liability insurance makes sure that such mishaps don’t interrupt the growth of your company.
For example, a contractor is working on a home renovation project. One day, they cause severe damage to a wall and the client sues him. General liability insurance coverage can help pay for the loss.
Every type of business is subject to risks of bodily injury to clients, visitors, or other people. If anyone is injured on your business premises or because of your business, CGLI will help you cover the medical losses.
Suppose you put your equipment down on the sidewalk while you’re loading your van in the morning. A neighbor distracted on their phone doesn’t see it and falls over it, shattering their hand. They can sue you for their medical expenses.
Your business advertisements may be infringing upon other parties’ copyrights. A business cannot use someone else’s ideas or work for commercial purposes without permission and you can be sued in such cases. However, CGLI will protect your business against any advertising injury, including social media risks.
A legal defense and court expenses can easily run up from hundreds to thousands of dollars for your business. As a result, your company could have to file for bankruptcy. Luckily, CGLI can help you cover such costs.
CGLI protects your business from any personal injury suits. While physical injury refers to injury of the body, personal injury refers to claims like wrongful arrest, defamation of character and wrongful eviction. CGLI protects you against such claims.
Libel and slander
CGLI will help you cover the legal fees in case your competitor sues you for causing damage to their reputation. For example, your employee says something negative about your competitor’s product during an interview. Later, it is found that the things said are not true, and your competitors file a lawsuit against you. In this case, general liability coverage will help your business cover the costs of the suits.
Some Policies to Consider for Your Business
Depending upon the nature of your business, you should consider adding the following policies:
Commercial umbrella insurance: If you think your business is doing fine with basic coverage, then think again. There are many loopholes and exclusions in your general policy that may bring your business to the brink of bankruptcy. Thus, having umbrella insurance will provide extra coverage in such instances.
Product liability insurance: This policy provides protection for bodily injury and property damage that occurs away from your premises but is caused by your business.
Liquor liability insurance: This policy protects you against claims for servicing or furnishing any alcoholic beverages during your business operations.
Professional liability insurance: Any mistake done by a professional at your company that causes financial loss to customers or clients is not covered by general liability insurance but by this coverage.
Employment practices liability insurance: If your employee files a lawsuit against your business, it is not covered by general liability insurance for small business. Therefore, your employment practices liability policy covers the risk.
Contractual liability insurance: If you are unable to complete work that you are contractually obligated to finish, you may be liable for losses or a lawsuit. Your general liability policy will not cover your losses, but a contractual liability insurance policy will.
Event insurance: If your work involves dealing with customers, like event production, also considered as high risk, you should add event insurance.
Drone insurance: If you use specialized equipment for your business, you might need a specialized liability policy to cover your losses as well. For example, if you own a photo studio and use drones for capturing shots in events, you should consider commercial drone insurance. You bear the legal liability as well as property damage costs if your drone gets damaged or damages other’s property.
Common General Liability Insurance Endorsements
Every insurance policy can be tailored to your needs. A good insurance agent will give you endorsement options and exclusions before you purchase a policy. Nevertheless, it is important for you to have a general knowledge of your insurance beforehand. Some of the most common endorsements are:
- Property damage
- Injury to your employee
- Error in services your business provides
- Supplemental liability insurance
You can modify your coverages by adding these endorsements based on the risks that your business encounters. Physical injury coverage is important owing to the rising medical costs in the US. Zurichna states that healthcare costs are expected to grow at a rate of 5.5% until 2027.
Don’t Expect Your CGLI to Cover Everything
However, there are always basic exclusions in all insurance policies. Even though general liability insurance covers a wide range of claims, it has its limits. For example, the policy doesn’t include employee injuries, which is addressed by workers compensation insurance.
General liability coverage doesn’t cover damage to your property that occurs due to fire, theft, or natural disaster. However, you can opt for a business owner’s policy to protect your business from such accidents. General liability business insurance is usually bundled with commercial property insurance and is available as a package in a business owners policy. It is also available as a stand-alone coverage depending upon your business.
Some of the other coverages not covered in the public liability insurance are:
- Professional errors
- Employees discrimination lawsuits
- Vehicles used by a business
- Employee injuries
- Damage to your business property
- Personal injury claims made by your employees
- Illegal and intentional acts
Coverages That Include CGLI
- Contractors insurance
- Landscaping insurance
- Handyman insurance
- General contractor insurance
- Lawyers insurance
- Accounting insurance
- Farm insurance
- Church insurance
- Entertainment insurance
- Beauty insurance
- Construction insurance
- Engineer insurance
- Truck insurance
- Taxi insurance
- Art Insurance
- Drone insurance
Factors that Determine the Cost of CGLI
More than one factor determines the premium amount for your general liability insurance. Depending upon the nature of your business, location and exposure to risk, your costs will fluctuate. Here are some factors to be taken into consideration:
Location: A business located in a highly populated area with greater risk exposures will pay more premium. For example, if you own a restaurant located in a popular and busy city, you are at much higher risk for third party injury claims than owning a restaurant someplace else. Therefore, rates vary based on the state where you conduct business.
Business exposure to risk: A small business that only delivers equipment will pay less than a company that deals with manufacturing equipment. Hence, a high level of risk will increase the insurance premium.
Years in business: If you’re in business for a long time and you experience growing revenue, this could affect your premium.
Your deductible: The deductible amount you choose for your insurance policy affects your premium. Therefore, if your deductible is higher, you pay a lower premium.
Your business may be small, or you may think you are unlikely to face a claim. Nevertheless, you are exposed to various liabilities at work. There are loopholes, accidents, and lawsuits are always a possibility. Getting an insurance policy will cost you very little compared to the expenses your business will incur in liabilities.
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January 26th, 2023 · 7 mins read
- What Do You Gain from Purchasing General Liability Insurance?
- Why Do You Need General Liability Insurance?
- Some Policies to Consider for Your Business
- Common General Liability Insurance Endorsements
- Don’t Expect Your CGLI to Cover Everything
- Coverages That Include CGLI
- Factors that Determine the Cost of CGLI
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