The 2018 Ultimate Guide to Business Liability Insurance
What is General Liability Insurance?
General Liability Insurance also is known as Commercial Liability Insurance provides coverage from claims related to customer injury, customer property damage and lawsuits from customers or other third parties. Additionally, general liability insurance is typically required before signing a commercial lease. Your business customers may also require you to have insurance before entering into contracts.
In today’s legal environment, lawsuits have become a cost of doing business and protecting your personal and business assets is critical. As I discussed in the article: Should I form an LLC for my Small Business, an LLC provides a legal layer of protection. Business liability also provides a layer of protection to your business. But you must be aware of what business liability insurance does and does not cover.
What does General Liability insurance cover?
Third party injuries
Injuries caused to your customers or other third parties may be covered. Per a report by the Hartford, Slip, and Fall accidents cost on average $20,000. Some customers are not agreeable to your efforts to resolve the matter and will decide to sue. Liability insurance may cover your attorney fees to negotiate a settlement or resolve in court.
- Immediate medical coverage
- Settlement Fees
- Lawyer Fees
- Court Fees
- Judgments (If the case goes to trial.)
Third Party Property Damage
Whether it’s loss data while working on a customer’s server or tree branch that falls the wrong way onto a customer’s car, accidents happen. I recently had my car washed at my local service station and the mirror was broken. Fortunately, it was an easy fix that the owner took care of right away. The company’s general liability insurance would have covered the cost. Of course, you want to have procedures in place that reduce the risks of property damage as much as possible.
- Repairs property damaged
- Replaces property that is non-repairable, lost or stolen
Product Liability. There are constantly recalling products ranging from yogurt to automobiles. We have all heard about the now infamous McDonald’s case where a customer was severely burned by hot coffee and awarded a multi-million dollar verdict by the jury. (She tried to settle with McDonald’s but they were only offering $800.) The judge later reduced the award and McDonald’s eventually settled for an undisclosed amount. Whether you manufacture or just sell a product you can be held liable for damages arising from the use or consumption of the product. If you white label and brand a product you should have product liability in place to protect you.
Someone accuses your company of stealing their logo or other protected trademark and sue you for copyright infringement. Business liability insurance can help defend you against such claims. This also protects you when employees speak disparagingly about customers and the customer finds out and sues for slander. I still cringe when I think about the time a colleague inadvertently added a customer to an e-mail he was forwarding complaining about the customer.
- Copyright Infringement
- Settlement or judgment cost
What General Liability Insurance Does Not Cover
Employee Injuries- Workman’s Compensation insurance is needed to protect your business when employees are injured. A full workman’s compensation article will be available soon.
Professional Mistakes- Errors that cause injury to your customers is covered by Professional Liability Insurance also known as Errors and Omissions coverage. A full professional liability Insurance guide will be available soon.
Vehicle coverage- You will need to obtain a separate policy to cover vehicles operated by your business.
Punitive Damages arising from a lawsuit
Intentional Acts- Injury caused to your customers or others deliberately would not be covered by general liability insurance.
Workmanship- Poor or defective work is not covered by general liability insurance and is typically covered by a warranty.
Cheapest general liability insurance for small business.
General business liability insurance for small businesses is inexpensive for most small business. Especially considering what you are protecting. Rates vary based on the type of business you have. A business with a storefront and customers coming and going will have higher rates than a home-based business that provides services. The policy limits also affect rates. The most common policy is 1 Million/2 Million limits. The policy will cover a maximum of 1 million dollars for any single claim and a maximum of 2 million dollars for all claim for the policy term. Policy terms typically are annual. Utilizing the research from two leaders in the industry, Hiscox Insurance, and Insureon, their data reflected the following rates.
Hiscox survey of 50,000 small business owners with 10 or fewer employees revealed that rates ranged between $30 and $100 per month with $81% of respondents paying less than $30 per month. Keep in mind your industry, policy limits and other factors affect your rate.
Insureon reviewed data from general liability policies from over 18,000 policies it sold in 2017 and on average premiums were $62 per month or $741 per year. The median premium was just $428 or $36 per year. As previously stated, rates with vary based on characteristics of your particular business and policy parameters.
Business Insurance Quotes
Needless to say, it is always best to shop around online and called your local auto or homeowners agent. They may be able to provide general liability insurance policies. The easiest thing to do right now is to shop online. Hiscox Insurance and Insureon among many others provide free no obligation quotes. I recommend to my small business customers they start with Hiscox. They have almost 10,000 reviews and an excellent average rating and low rates. I also reviewed their Better Business Bureau profile which has an A+ rating.
Business insurance summary:
Like all insurance, general liability insurance is designed to minimize your risks of unexpected events causing substantial financial harm. The hope is not to ever need it. However, hope is not a business plan. Your business is an investment and the goal of every business is to limit the downside while maximizing the upside. Just read the Small Business Administration report (here) on the impact of litigation on small businesses.
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