General liability insurance coverage
General liability insurance offers a variety of coverages to protect your small business, but it doesn’t cover everything. Learning what general liability insurance covers and how much you need will give you the confidence that you’re insuring your business properly.
What does general liability insurance cover?
Typically, general liability insurance covers:
Bodily injury and property damage liability
General liability covers business related incidents that result in bodily injury to a third-party. This can include a customer slipping and falling on your premises, or an employee accidentally dropping a toolbox on someone’s foot. Of course, this coverage only applies to non-employee injuries.
Additionally, general liability protects any third-party property damage resulting from your business operations. For example, a landscaper’s policy may cover a stone that kicks up from their lawn mower and breaks a client’s window.
Products - completed operations
General liability insurance coverage includes liability protection for both products and completed operations exposures. Products are any goods that you manufacture, sell, or distribute in your business. If a product causes physical injury or illness, such as a customer becoming sick from undercooked food, a business can find protection under this coverage.
Alternatively, completed operations protects against faulty services or work performed by a business. A project must be fully complete for coverage to apply. For instance, a customer hires a plumber to install a shower drain as part of a bathroom renovation, but the plumber didn’t seal the drain properly and the bathroom flooded days later. The plumber’s general liability policy can cover up to his liability limits for his faulty workmanship since the incident occurred after he left the premises.
Personal and advertising injury
Not all injuries are physical. Any written or verbal communications that cause harm can also be covered under your general liability policy. This encompasses libel, slander, malicious mischief and copyright infringement, to name a few. For example, a small business retailer suffers a decrease in business after a local competitor starts a rumor about their bad customer service. The small business owner can sue the competitor for personal and advertising injury for damaging their reputation and profitability.
Medical payments cover any non-employee medical or funeral related expenses for which your business is responsible. Of course, your coverage depends on your selected limits. For example, a shelf falls on a customer while they’re grocery shopping. Their medical expenses total $10,000, but the grocer’s liability insurance covers only $5,000 toward medical payments. In this case, the store would be responsible for paying the remaining $5,000 out-of-pocket.
Damage to premises rented to you
General liability coverage typically includes coverage for any damages to non-owned land, buildings, or structures. The insured, or their business, must be legally liable for the damages for coverage to apply. For instance, a local restaurant rents property that catches fire due to a negligent employee leaving a frying pan unattended. General liability might cover the damages since the business caused the fire. In contrast, this coverage wouldn’t apply if a lightning strike started the fire.
What general liability doesn’t cover
You might have additional insurance needs that aren't covered by general liability insurance. There are many other products available to protect your business. Here’s a short list:
- Owned commercial property - protected along with other equipment and goods under a business owner’s policy (BOP).
- Employee injuries - coverage for your employees is required by most states, and is only available under workers’ compensation.
- Professional mistakes - if your business provides a service or advice you’ll want to consider professional liability insurance.
- Commercial vehicles - vehicles used for business are protected under a commercial auto policy. A personal auto policy won’t cover work related incidents.
How much coverage do you need?
The amount of commercial liability insurance coverage you need depends on:
- Your risk exposure
- Contractual requirements
Generally, the higher your risk, the more coverage you’ll need. Additionally, certain employers or clients may require you carry specific limits of general liability coverage before they allow you to work with them. Contracts commonly require a $1 million per occurrence policy. This means your insurance company will pay up to $1 million for a single incident that’s covered under your general liability policy.
Additional coverage options may be available depending on your insurance company. A great way to find out is to speak with a licensed professional who can provide general liability insurance coverage options and pricing for your specific situation.