About General Liability Insurance

All businesses, regardless of industry, face risks that should be covered by insurance. The most common and comprehensive type of policy business owners invest in is general liability insurance (or CGL).

Some of the risks CGL insurance covers are:

  • Bodily injury
  • Property damage
  • Medical payments
  • Legal defense and judgment
  • Personal and advertising injury

While businesses aren't legally required to carry general liability insurance, operating without it is extremely risky. If your business is sued, you could end up facing fees totaling hundreds of thousands of dollars (or more). Having a sufficient CGL policy in place to help compensate for these damages is the only way to prevent this type of event from devastating your business.

Learn more about the risks covered by general liability insurance.

COMMON SITUATIONS THAT GENERAL LIABILITY INSURANCE WOULD COVER FOR A HOME RENTAL BUSINESS

Example 1:  You make a mistake while fixing some issues in one of your rental properties and cause a small fire that damages your renter’s furniture.  Since they do not have renter’s insurance, they are suing you to replace all damaged items. General liability insurance will pay for legal representation and third-party damages awarded by the court.

Example 2:  Your handyman hasn’t had time to fix the protruding bricks on your rental’s walkway and a visitor trips and falls as a result.  His injury requires surgery and several weeks out of work. If a lawsuit arises from these injuries, your general liability policy will cover you, up to the limits of the policy.

Example 3:  You have purchased a new rental in a neighborhood with a homeowners’ association.  The HOA requires evidence of liability insurance for all rental properties. General liability insurance should cover this requirement.

Of course, this is not an exhaustive list of perils a general liability insurance policy will cover, and some conditions may result in a particular peril not being covered. It's always best to talk to your agent in-depth about the specifics of your policy to avoid blind spots in coverage.

Cost Of General Liability Insurance

On average, home rental businesses in America spend between $350 - $700 per year for $1 million in general liability coverage.

Check out the chart below for a snapshot of average CGL expenditure across a variety of industries:

Graph showing average price of general liability insurance prices per industry

Several factors will determine the price of your policy. These include your:

  • Location
  • Deductible
  • Number of employees
  • Per-occurrence limit
  • General aggregate limit

You may be able to acquire general liability insurance at a discounted rate by purchasing it as part of a business owner's policy (BOP) rather than as a standalone policy. A BOP is a more comprehensive solution that includes multiple forms of coverage, such as business interruption and property insurance.

Recommended action box icon

How much will the right insurance cost you?

See offers from our recommended professional liability insurance provider

Get a Free Quote

Other Types Of Coverage Home Rental Businesses Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all home rental businesses should obtain:

Landlord Insurance

Rental properties require special coverage that is not included in your standard homeowners' policy.  Landlord insurance offers coverage similar to both commercial property insurance and homeowners. It pays to repair or rebuild the damaged building, offers limited coverage for the personal property kept onsite, and offers fair rental value coverage while the landlord cannot collect rent after a covered loss. 

Landlord insurance can be written for all types of rentals, including single-family dwellings, quads, triplexes, and duplexes. 

Types Of Coverage Some Home Rental Businesses May Need

In addition to the policies outlined above, there are a few other types of coverage your home rental business may require depending on certain aspects of your operations. Some of these might not apply to you, so be sure to ask your agent which policies are right for your business.

Workers Compensation Insurance

If you employ a team to keep up with your rental properties, your state may require you to purchase workers compensation insurance.  The policy extends coverage to employees involved in an on-the-job accident, including payment for medical bills and lost wages.     

Workers compensation insurance is typically purchased as a standalone policy.

Commercial Umbrella Liability Insurance

Given today’s litigious society, landlords with significant assets should consider purchasing a commercial umbrella policy.  If a substantial loss occurs, your underlying general liability limits could be reached, leaving you responsible for the difference.  An umbrella policy takes over where the GL leaves off, keeping your personal and professional assets protected.

Additional Steps To Protect Your Business

Although it's easy (and essential) to invest in business insurance, it should not be your frontline defense. Yes, insurance will compensate for your business' financial losses after an incident occurs, but it's much better to avoid losses altogether.

With this in mind, here are three things you can do to better protect your business:

  • Use legally robust contracts and other business documents. (We offer free templates for some of the most common legal forms.)
  • Set up a limited liability company (LLC) to protect your personal assets. (Refer to our guide for step-by-step instructions on how to form an LLC in your state.)
  • Streamline your business' internal processes. This will remove unnecessary variables from common tasks and create a safe, consistent environment for conducting business.