Any business, no matter the size, can experience an insurable incident at one point or another. Some incidences result in liability claims and lawsuits that could cause significant financial losses to any company. Read on to learn the importance of including liability coverage in your business insurance policy.
What Is Business Liability Insurance?
This policy pays for costs arising from formal lawsuits or any third-party claims, protecting business owners from financial loss. The main types of liability insurance for small businesses are:
- General liability
- Professional liability
- Product liability
What Does Business Liability Insurance Cover?
The policy covers a broad range of costs associated with liability lawsuits and claims, including:
- Medical bills for a customer who’s injured on the business premises
- Attorney fees for liability lawsuit defense
- Liability settlements or court-ordered compensatory judgments against your company
- Court-mandated punitive damages
- General liability insurance for business owners that rent their commercial spaces may also provide liability protection in the event of damage due to covered perils like fire or mold
- Your general liability insurance coverage may also extend to claims of defamation (libel and slander), breach of copyright, and false advertising
When Should Small Businesses Seek out General Liability Insurance?
You shouldn’t stay unprotected against liability lawsuits or claims long after opening your business.
Here are some of the circ*mstances that compel small business owners to get this business insurance protection right away:
- Professional licensure-To practice as a real estate agent, dentist, or accountant in the U.S., you’ll need a license. You may not qualify for the license without general liability coverage.
- Business contract bidding-If you own an engineering, construction, or landscaping company, you might need liability insurance to get contracts from larger companies.
- Renting office space-Commercial property owners may require professionals like architects or electricians to purchase this policy as part of their lease obligations.
How Much General Liability Insurance Does Your Business Need?
Always choose a general liability insurance coverage amount that matches your liability risk levels, depending on factors like your industry and business size. Also, make sure to understand the limits and terms of your policy.
For example, with a $1 million occurrence limit, your active policy can pay up to $1 million to cover a single liability claim. On the other hand, a $2 million aggregate limit means that your policy can pay a maximum of $2 million to cover claims filed within your policy’s lifetime, which is usually one year.
You can also extend your general liability policy with endorsem*nts to protect your business against specific risks.
Optional custom coverages include:
- Product liability
- Hired and non-owned auto insurance
- Liquor liability insurance
What Are the General Liability Insurance Requirements for Small Business?
Your prospective insurer will require certain information from you before offering you general liability business insurance. The carrier will request specifics such as:
- Your revenue
- Number of employees
- Your claims history
Keep in mind that your company’s liability risk level and claims history will impact your ability to get a quote for the requested policy. These factors will also determine your liability insurance costs.
What Is the Cost of Business Liability Insurance?
The level of risk that an insurer assumes by covering your business will influence your business liability insurance costs. For example, to cover heavy, expensive, and dangerous equipment like cranes, you’ll pay higher premiums than a tax consultant who sits at a workstation all day.
If your risk level is low, consider obtaining a business owner’s policy (BOP). This policy minimizes your business insurance costs by combining general liability and property coverage.
To find the best business insurance for small businesses, contact the experts at McCarty Insurance today. We look forward to helping you meet your commercial coverage needs.
This policy pays for costs arising from formal lawsuits or any third-party claims, protecting business owners from financial loss. The main types of liability insurance for small businesses are:
- General liability
- Professional liability
- Product liability
" } },{ "@type": "Question", "name": "What Does Business Liability Insurance Cover?", "acceptedAnswer": { "@type": "Answer", "text": "
The policy covers a broad range of costs associated with liability lawsuits and claims, including:
- Medical bills for a customer who’s injured on the business premises
- Attorney fees for liability lawsuit defense
- Liability settlements or court-ordered compensatory judgments against your company
- Court-mandated punitive damages
- General liability insurance for business owners that rent their commercial spaces may also provide liability protection in the event of damage due to covered perils like fire or mold
- Your general liability insurance coverage may also extend to claims of defamation (libel and slander), breach of copyright, and false advertising
- Professional licensure-To practice as a real estate agent, dentist, or accountant in the U.S., you’ll need a license. You may not qualify for the license without general liability coverage.
- Business contract bidding-If you own an engineering, construction, or landscaping company, you might need liability insurance to get contracts from larger companies.
- Renting office space-Commercial property owners may require professionals like architects or electricians to purchase this policy as part of their lease obligations.
- Product liability
- Hired and non-owned auto insurance
- Liquor liability insurance
- Your revenue
- Number of employees
- Your claims history
" } },{ "@type": "Question", "name": "When Should Small Businesses Seek out General Liability Insurance?", "acceptedAnswer": { "@type": "Answer", "text": "
You shouldn’t stay unprotected against liability lawsuits or claims long after opening your business.
Here are some of the circ*mstances that compel small business owners to get this business insurance protection right away:
" } },{ "@type": "Question", "name": "How Much General Liability Insurance Does Your Business Need?", "acceptedAnswer": { "@type": "Answer", "text": "
Always choose a general liability insurance coverage amount that matches your liability risk levels, depending on factors like your industry and business size. Also, make sure to understand the limits and terms of your policy.
For example, with a $1 million occurrence limit, your active policy can pay up to $1 million to cover a single liability claim. On the other hand, a $2 million aggregate limit means that your policy can pay a maximum of $2 million to cover claims filed within your policy’s lifetime, which is usually one year.
You can also extend your general liability policy with endorsem*nts to protect your business against specific risks.
Optional custom coverages include:
" } },{ "@type": "Question", "name": "What Are the General Liability Insurance Requirements for Small Business?", "acceptedAnswer": { "@type": "Answer", "text": "
Your prospective insurer will require certain information from you before offering you general liability business insurance. The carrier will request specifics such as:
Keep in mind that your company’s liability risk level and claims history will impact your ability to get a quote for the requested policy. These factors will also determine your liability insurance costs.
" } },{ "@type": "Question", "name": "What Is the Cost of Business Liability Insurance?", "acceptedAnswer": { "@type": "Answer", "text": "The level of risk that an insurer assumes by covering your business will influence your business liability insurance costs. For example, to cover heavy, expensive, and dangerous equipment like cranes, you’ll pay higher premiums than a tax consultant who sits at a workstation all day.
If your risk level is low, consider obtaining a business owner’s policy (BOP). This policy minimizes your business insurance costs by combining general liability and property coverage." } }]}
Frequently Asked Questions
1. What is the purpose of the business general liability insurance?
General liability insurance, also referred to as business liability insurance, offers protection for both you and your business against claims related to bodily injuries and property damage. It serves as a safeguard against a wide range of general risks that businesses commonly face. Virtually every business can benefit from having general liability insurance as part of its risk management strategy.
2. Why is liability insurance necessary?
Liability insurance provides coverage for medical and legal expenses in the event that you are deemed legally responsible for causing injury to another person or damage to their property. It serves as a financial safeguard, helping to mitigate the costs associated with such incidents. In most states, drivers are required to carry liability insurance as a mandatory measure to ensure protection for themselves and others in the event of an accident.
3. What is the difference between business liability insurance and general liability insurance?
General liability insurance primarily offers coverage for physical damages and injuries, providing financial protection in those situations. On the other hand, professional liability insurance focuses on safeguarding against financial damages resulting from professional errors or negligence. In some cases, a general liability policy may include product liability insurance, which specifically benefits construction professionals, manufacturers, retailers, and other business owners who deal with products. This additional coverage ensures protection in case any products they handle or distribute cause harm or damage.
