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If you own a business you've likely heard of some of the many types of insurance you may need to help cover you in cases of emergency. Check out this guide to general liability insurance to ensure you are more aware of how insuring your business will help make it more successful!
General liability insurance protects you from paying out of pocket for third-party bodily injury and third-party property damage. It also covers you if you're accused of libel or slander. It can also be referred to as Commercial General Liability or Business Liability Insurance. All three terms mean the same thing.
General liability insurance focuses on harms that happen to private citizens who interact with your business in some way—maybe they fall down the stairs at one of your buildings and incur bodily injury, or their purse was stolen in your restaurant, or one of your employees bad mouthed a client on the internet, and the client claims to be hurt. Business Liability Insurance would cover all those situations.
Often, clients won't sign a contract with you without having a policy. Your potential client wants to be sure that no matter what happens during their contract with you, you can financially cover issues.
Bodily Injury
Product Liability
Advertising Injuries
Property Damage
Reputational Harm
Damage to premises rented to you
General liability insurance doesn't cover the injuries your employees might experience on the job. You need Worker's Compensation for that. And it doesn't cover mistakes your employees make that hurt your client—You need professional liability insurance for that, sometimes called "Errors and Omissions."
Often companies will help you bundle some essential insurances together for you in a Business Owners Policy, or BOP. They might include Professional liability insurance, general liability insurance, and commercial auto insurance. When you ask about bundling, make sure that you assess where your business's risk lies. A construction company will need more general liability insurance coverage than an accounting firm, and an accounting firm might want to make sure their Errors and Omissions insurance is pretty good.
Roughly a third of all general liability insurance claims are contested.
Like any insurance policy, the cost per month for general liability insurance can vary widely based on several factors.
Companies with low-risk factors might only pay a couple hundred a year, whereas a company with a high risk—like a construction company—might pay several thousand dollars a year. Things like your business's age, location, the number of employees, the building condition, and your company's insurance claim's history can affect how expensive your policy is.
When we talk about general liability insurance limits, we're talking about your aggregate limit and your per-occurrence limit.
An aggregate limit is a cap that your insurance company will pay for all claims made during that policy period, usually one year. So, if one customer's medical expenses cost the insurance company 450k to settle, and there's another lawsuit claiming defamation that they need to settle for 750k, then it's a good thing your aggregate cap is two million dollars.
The per-occurrence limit is your insurance company's cap for each individual claim. Many policies have a one million per occurrence limit, so they'll pay up to that amount for a single claim. If the customer who was hurt at your site had to undergo major surgery and claims time lost from work, the claim could be much higher than 450k.
The higher your aggregate and per-occurrence limit are, the more your premiums will be. If you have a low deductible, your policy will cost more to account for the money you'll save in the event of an incident.
The National Flood Insurance Program (NFIP) issues commercial flood insurance policies. They are a part of the federal emergency management agency (FEMA). NFIP have set up a standard risk assessment so that regardless of carrier, all flood insurance policies are assessed and priced similarly, and they work with communities all across the country to manage their floodplains effectively and efficiently. The NFIP rating system looks at the Where, How and What of your commercial property.
What's the size and location of your business? Where is your business housed? Do you own the property, or are you renting? Do you often use third-party sites to conduct business?
Who are your customers? Where do they routinely go? Are there times they might have access to unsafe areas? Do your customers or clients require general liability insurance for work contracts?
How many employees do you have, and how experienced are they? Are they temporary or full time? Do you or your employees use social media professionally?
The amount of general liability coverage that your business should have will also depend on your company's goals, contract obligations, and the cash you have on hand to pay out of pocket if you need to.
Your advisor can help you understand the risks your business might face. As your business grows and changes, your insurance needs will evolve right alongside. Policy periods of one year let you assess your changing needs routinely so you won't be caught out by a large claim.
A lease or contract may require general liability coverage, and your client or landlord may specify how much coverage they need you to have. A boutique winery needs general liability insurance if they sell at local food and wine festivals. Event organization companies will require all booths, particularly ones selling alcohol, to have general liability insurance.
That way, if a customer is harmed at the winery's booth, or if liquid from a spilled bottle gets into the sound system near the winery's booth, the organizers have a way to ensure the small business can cover the cost.
You can get increased coverage for your business with commercial umbrella insurance to cover you, your employees, and the vehicles you use. It's always a good idea to understand your state's insurance laws.
Do your due diligence to understand the expectations of your clients and the organizations you work with as well. If someone sues your business and you don't have adequate coverage, your finances and your business's future could be at risk.
Montgomery is here to help we evaluate 100's of insurance companies to find the best option for you.
"Responsive... Professional... Innovative. We had a wonderful experience with Montgomery Insurance Services when shopping for Life Insurance. Tom took the time to review all of our options and helped us make the best decision. There was never any pressure....they moved at our pace. When we had questions at night time and on the weekends, Tom took the time to review everything with us. We now have the peace of mind knowing that our insurance is in order. We were very impressed with the turn around time and responsiveness. Very impressed!"
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