Essential Takeaways:
- Businesses are not required to hold general liability insurance in the strictest legal sense. Still, it is nearly mandatory in practice and should be a strong part of a company’s portfolio.
- General liability insurance typically covers third-party bodily injury and property damage, advertising injury, and the costs of legal defense.
- Some elements of strong insurance coverage, such as cyber liability, errors & omissions, property insurance, and employee injury, are not usually covered under general liability policies.
Business owners, managers, and decision-makers evaluating and managing commercial insurance policies have numerous coverage options. You walk the razor’s edge between overcommitting to insurance (and paying more than you need to) and skipping coverage that could save your company in a time of need. In general, business liability insurance is among the most important policies, and it is essential to understand both its scope and its limitations.
General liability insurance can cover numerous types of risks, from bodily injury to legal defense costs. However, decision-makers should also understand where coverage does not apply so that businesses can avoid accidental exposure. Here are the basics on the scope and limitations of general liability insurance.
Is General Liability Insurance Mandatory for Businesses?
Commercial general liability insurance is not typically mandatory for a business in the strictest sense. However, in practice, a business is unlikely to perform even basic tasks without general liability insurance. Commercial leases, professional licenses, and most client contracts will require at least some level of general liability coverage. This is why selecting the right insurance coverage for your business is such an important part of a strong, forward-looking strategy.
What Does General Liability Insurance Typically Cover?
A general liability insurance policy’s primary purpose is to protect your company from the financial ramifications of injury inflicted by or due to the company. This can come in numerous forms, the primary of which are:
Third-Party Injury Claims
When a non-employee is physically injured because of something your company did or owns, you may be responsible for costs such as medical compensation or legal fees if that party decides to take action. Customers slipping on a wet floor or tripping over equipment are some of the most common examples, but the exact scenario will depend on how your business operates. General liability coverage can help to cover the costs in such situations.
Third-party Property Damage
Property damage coverage is one of the central protections in a general liability policy. This may cover your business if your staff or equipment causes damage to someone else’s property. For instance, your contractor may accidentally damage a client’s wall, or equipment belonging to your business could scrape someone’s car.
Personal and Advertising Injury
One of the most commonly overlooked protections general liability insurance can offer is personal injury protection alongside advertising injury coverage. This encompasses defamation, copyright infringement, misleading advertising, and more. Keep in mind that even unfounded lawsuits can be expensive to handle, so do not assume you are safe just because you do your due diligence in advertising.
Legal Defense Coverage
Business insurance protections would not be complete without coverage for legal defense. Should you have a lawsuit brought against you, whether founded or unfounded, you will need to pay attorney fees, court costs, discovery fees (e.g., to acquire paperwork), expert witness costs as necessary, and more. General liability insurance can help to address these expenses.
Most Common General Liability Insurance Exclusions
A general liability policy is versatile, but it does not cover everything. As you consider the best policy for your company, remember that general liability will not usually cover:
Employee Injury
A business should carry insurance to handle the financial aspects of an employee injury, but general liability insurance is not the appropriate policy. Workers’ compensation insurance covers this element.
Professional Errors
While general liability protection can offer some assistance with advertising or personal injury claims, this coverage can be limited. Be sure to evaluate the details and secure an errors & omissions (also called professional liability) policy where necessary.
Damage to Business Property
General liability insurance protects other people’s property, not your own. To make certain that you have coverage for your company’s owned property, choose a commercial property insurance policy.
Cyber Incidents
Technology is now baked into the daily operations of almost all companies worldwide. This means data breaches and cyber threats are more likely than ever. General liability insurance typically does not cover this facet of risk, which is best handled by cyber liability insurance.
Get Strong General Liability Insurance Coverage for Your Business
General liability insurance is a foundational element of any company’s insurance strategy. Whether you are looking for small business insurance or commercial insurance policies for large corporations, it is important to work with industry professionals with years of experience. The team at CI Solutions can help you anticipate the greatest risks to your company and build an insurance strategy to prevent coverage gaps. Contact CI Solutions to begin building a policy customized to your needs.