Running a small business involves a plethora of responsibilities, from managing operations to ensuring customer/client satisfaction. However, one critical aspect that often gets overlooked is understanding and managing your risks.
Along the way, you likely heard about general liability insurance – a vital safeguard for any small business owner or entrepreneur. But what exactly does this term mean, and how does it apply to protecting your business?
What is General Liability Insurance?
General liability insurance (GL or CGL) is a standard insurance policy designed to protect your business from financial loss due to claims of damage or injury caused by your business operations, products, or services. While it may not cover every potential risk, it serves as a foundational layer of protection against some of the most common liabilities faced by businesses across various industries.
What Does General Liability Typically Cover?
Bodily Injury
If a customer or third party is injured on your business premises or due to your business operations, general liability insurance may help cover medical expenses, legal fees, and potential settlements or judgments.
Property Damage
In the event that your business activities result in damage to someone else’s property, this coverage can assist with the costs of repair or replacement. For instance, if a contractor accidentally damages a client’s home during renovations, general liability insurance can cover the associated costs.
Personal and Advertising Injury
This includes coverage for claims of libel, slander, copyright infringement, or unfair competition resulting from your advertising or promotional activities. Don’t advertise? If you have a website, social media, or other content online, you are still promoting your business in this sense of the word.
Legal Defense Costs
We live in a litigious society, and even if a claim against your business is unfounded, the legal defense costs can be substantial. General liability insurance may help with attorney fees, court costs, and other legal expenses.
What is Typically Excluded from General Liability Insurance?
While general liability insurance often provides broad protection, there are certain exclusions to be mindful of:
Professional Liability
Also known as errors and omissions (E&O) insurance, this type of coverage is essential for businesses that provide professional services or advice. It protects against claims of negligence, errors, or inadequate work. For example, a graphic designer who makes an error in a client’s project would need E&O coverage, not general liability.
Employee Injuries
Injuries or illnesses sustained by employees while on the job are generally not covered under general liability insurance. Instead, workers’ compensation insurance is needed to address these risks.
Damage to Your Own Property
General liability insurance does not cover damage to your own business property. For this, you’ll need commercial property insurance, which can help repair or replace damaged assets.
Intentional Acts
Any intentional wrongdoing or illegal acts committed by you or your employees are not covered. Insurance policies are designed to cover unforeseen events, not deliberate misconduct.
Cyber Liability
While there may be some coverage for cyber losses or data breaches in your GL policy – possibly with an endorsement – it likely isn’t broad enough coverage for your business’s protection. In addition to coverages, the limits may not be high enough depending on your risk level.
Understanding general liability insurance is essential for any small business owner or entrepreneur aiming to protect their investment and secure their future. While it covers a broad range of risks, it’s important to recognize its limitations and consider additional coverage where necessary.
Taking the time to assess your risk profile and tailoring your insurance coverage can make all the difference in navigating the uncertainties of the business world. We’re happy to help you review your business’s risks and discuss your options.