General Liability Insurance: What Is It & What Does It Cover

General liability insurance, sometimes called business liability insurance, protects businesses from financial loss that results from claims of injury or damage by customers or members of the public. This insurance typically covers legal costs and payouts for accidents on your premises, damage you cause to other peoples’ property, and advertising mistakes.

What is General Liability Insurance?

General liability insurance is a type of commercial insurance businesses purchase to protect against financial losses that may arise from various incidents. These incidents could include damage to non-company property, bodily injury, or advertising-related issues such as defamation and copyright infringement. 

Of all the various types of business insurance available, general liability is crucial for any business as it provides coverage against potential lawsuits or claims made by third parties, ensuring companies have the protection necessary to defend themselves against potentially significant claims.

What Does General Liability Insurance Cover?

General liability coverage typically extends beyond just property damage and bodily injury. It offers broad coverage to businesses, protecting against diverse legal issues that may arise during operations. Here are some examples of things typically covered by general liability insurance:

• Bodily injury and property damage liability: This provides coverage against legal liabilities that may arise from accidental injuries or damage to another person or company’s property. For example, if a customer slips and falls in your store, general liability can cover their medical bills and your legal expenses if they sue.
• Personal and advertising injury: This covers claims related to libel, slander, invasion of privacy, copyright infringement, or false advertising. Suppose you inadvertently use copyrighted images in your advertising. In this case, general liability insurance will cover the legal expenses and any settlement if the copyright owner sues you.
• Medical payments: This coverage pays for medical expenses if someone gets hurt on your business premises or if you cause an injury at a client’s location. For instance, if a visitor gets injured at your office, this coverage will handle immediate medical expenses, regardless of who’s at fault.
• Products and completed operations: This covers bodily injury and property damage caused by your products or completed work. For instance, if a product you sold is defective and causes harm to a customer, general liability may cover the resulting legal and compensation costs.

While general liability insurance protects self-employed individuals and small business owners against various risks, it doesn’t cover everything. General liability insurance excludes damages to your business property, professional mistakes, work-related injuries to your employees, and intentional acts of damage or harm. To protect against losses such as these, you’ll need additional policies such as professional liability insurance, workers’ compensation insurance, and commercial property insurance.

General Liability Insurance Example

Let’s say you own a local bakery. One day, a customer visits the bakery and, while browsing, they slip on a wet floor that was recently cleaned but not marked with a warning sign. As a result, the customer suffers a sprained wrist and decides to sue the bakery for their medical expenses and the pain and suffering caused by the accident.

In this situation, general liability insurance would cover the customer’s medical expenses and any legal costs associated with the lawsuit. Without insurance, the bakery would have to pay these costs out of pocket, which could be a significant financial burden. Thanks to general liability insurance, the business can continue to operate without fearing financial ruin due to incidents such as this one.

Businesses That Need General Liability Insurance

General liability insurance is necessary for all businesses, regardless of size or sector. It’s particularly critical for companies that have a physical location, offer services at a client’s premises, or manufacture and sell products. Here’s a list of some businesses that are often in need of this type of coverage:

• Retail stores: With constant customer foot traffic, there are abundant opportunities for accidents in a retail setting that can result in bodily injury or damage to customers’ property. General liability insurance would protect the store from financial losses stemming from such incidents.
• Construction and contracting companies: Accidental damage to property, injuries on a job site, or even claims of poor workmanship are common in these industries and can lead to significant losses without coverage.
• Restaurants and food service businesses: These establishments face risks similar to retail stores, with the added risk of food-related incidents, such as food poisoning or allergic reactions. In such cases, general liability can cover legal and medical costs.
• Professional service providers: Providers like consultants, freelancers, accountants, and marketing agencies might seem low risk, but they can face risks of advertising injury and other claims. 
• Manufacturing companies: Businesses that manufacture products can be held liable if their product causes harm or injury to a consumer. General liability insurance usually includes product liability, which can cover associated costs.

How To Get General Liability Insurance

Getting general liability insurance for your business is crucial to securing financial protection and ensuring you can continue operating in the event of an accident or incident. Follow these steps to get general liability coverage for your business:

1. Identify your business risks: Every business is unique and faces its own potential risks. Take time to identify the specific risks associated with your business or industry. This could include customer injuries, property damage, and advertising injuries. Understanding these risks will help you determine the level of coverage that best suits your business.
2. Research providers: Look for providers who specialize in business insurance – particularly for your industry – and have a good reputation for providing coverage to businesses of your size. Consider each company’s financial stability, customer service, and claim processing efficiency. You can also check customer reviews and ratings to gauge their reliability.
3. Compare quotes: Once you identify a few potential providers, get quotes from each. While comparing quotes, look beyond premiums at what each policy covers and excludes. 
4. Consult with a professional (optional): Insurance policies can be complex and difficult to understand. If you need help understanding your options, consult an insurance agent or broker to help you decipher the policy terms and conditions. They can provide valuable advice on the best policy for your business based on your risk assessment.
5. Purchase the policy: Once you identify the right policy for your business, bind coverage. Ensure you understand all the terms and conditions of the policy before signing. After purchasing, keep your policy documents on file and ensure relevant personnel in your business are familiar with the coverage details.
6. Review the policy annually: Business risks can change over time. Therefore, reviewing your policy at least once a year or whenever there are significant changes in your business is essential. This way, you can ensure that your insurance coverage evolves with your company and continues to provide adequate protection for your operations.