General liability insurance, also known as commercial general liability insurance (CGL) is a basic insurance coverage designed to protect the assets of your small business from claims that arise from normal business operations.
Most LLCs and small businesses choose to buy general liability insurance very soon after forming, as this will help to ensure they are protected in the case of an accident or catastrophe.
General liability insurance costs will vary depending on the size and risks involved with your business— it is essential to learn more and get a quote.
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What Is General Liability Insurance?
When you start a business, it is recommended to get general liability insurance coverage. General liability insurance coverage can protect your LLC if someone is injured on your business’s property, and it covers damage caused by you or your employees. The policy will cover your legal defense and the costs associated with the loss if you are found liable, up to the stated limits of your policy.
General Liability Insurance Definition
General liability insurance is a type of commercial liability insurance policy that protects a business from the financial burden of claims arising from bodily injury, personal injury, or property damage.
Risks typically covered by a General Liability Business Insurance policy include:
- Bodily injury (physical damage to a person’s body, non-employees)
- Property damage (injury to real or personal property, whether your property or a client’s)
- Medical payments (resulting from accidents that happen on your premises)
- Personal liabilities (libel, slander, copyright infringement, invasion of property and privacy, wrongful eviction, false arrest)
- Advertising liabilities injury (losses caused by your advertising or by violating another company’s copyright)
- Legal defense and judgment
How Much Does General Liability Insurance Cost?
The average cost of general liability coverage ranges from about $300 to $1,000 per year, however, different types of businesses will have different needs and incur different risks.
There are several variables that will affect the premiums for small business owners:
- Risk exposure (some businesses are more prone to risk than others)
- Location, generally based on ZIP code
- Annual payroll amount (how many people you employ)
- Per occurrence limit (amount of coverage payable per incident)
- Aggregate limit (amount of coverage payable per policy period)
The amounts above are for estimation purposes only. If you want an accurate cost of what general liability insurance would cost for your LLC, you will need to get a quote from an insurance agent.
An effective way to lower your premiums is to employ risk management procedures. Your agent should have information on how to improve these procedures for your business. A business that follows proper processes will inherently lower the risk of an insurance claim.
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Benefits Of Having General Liability Insurance
In a claim situation, a commercial general liability policy will protect your LLC’s assets. There are, however, other tangible benefits of your LLC carrying liability insurance. Having a general liability insurance policy also:
- Demonstrates that you are a secure and established business: Displaying to your clients that you are not just a “fly-by-night” company by protecting their assets is a great selling feature. Handing them a copy of your insurance certificate will instill confidence that you are the right company to get the job done.
- Shows that you care about your employees: Employees can rest a bit easier if they know that their work is protected and backed by insurance.
- May help you gain business: Potential clients sometimes require an insurance policy to be in place, as they don’t want to be held liable for any possible mistakes. Holding an insurance policy may make the difference between your bid and your competitor’s.
Does My LLC Or Company Need General Liability Insurance?
If your business owns real estate or other valuable assets, general liability insurance is a highly recommended investment. The typical price of premiums falls between $300 and $1,000 per year based upon your coverage needs and line of work. Liability insurance can protect your business from the financial burden of litigation, which can easily cost tens to hundreds of thousands of dollars.
Considering the comparatively low cost of premiums, a general liability insurance policy is a small price to pay for the protection and peace of mind it offers.
What Does General Liability Insurance Not Cover?
Commercial general liability insurance is considered "comprehensive coverage", but is not a one-size-fits-all policy. There are risks that your business may face that require different insurance policies to ensure coverage.
Risks typically not covered by general liability insurance include:
- Intentional acts
- Warranties offered by your business
- Damages to clients from professional advice or services (professional liability insurance)
- Payments to employees who have been injured on the job (workers’ compensation)
- Payments to employees who have been terminated (unemployment insurance)
- Risks like fire or storm damage to owned commercial properties (commercial property insurance)
- Auto insurance for commercially owned or operated vehicles (commercial auto insurance)
- Coverage that exceeds the limits of standard insurance (umbrella liability insurance)
To ensure that your LLC is covered in the case of any loss, be sure to take a look at your business's specific risks and plan your insurance coverage around that.
Read about other types of business insurance to ensure you are fully protected!
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Frequently Asked Questions
Am I required by law to carry general liability insurance?
In most cases, no, your LLC is not required by law to carry insurance. Some employers or clients might require you to carry a certain amount of general liability insurance before you can work for them. Some property owners may require that you hold liability insurance when renting business space. Businesses in some industries like electricians, plumbers, and handymen use “Licensed and Insured” as a marketing phrase.
Besides being required, there are many other benefits to general liability insurance.
Could a lawsuit reach into my personal assets as well as my business assets?
Possibly. LLCs are not necessarily an impenetrable entity. The answer to this question is more of a legal matter than an insurance one. Read our article on maintaining your corporate veil, and consult with your attorney about which of your assets could be exposed.
Is Small Business Liability Insurance the same as General Liability Insurance?
General Liability Insurance is just one type of commercial liability insurance coverage. There are other types of liability insurance policies for small businesses. The most notable is professional liability insurance. While covering different types of risks, professional liability is also a type of liability insurance.
What if my liability insurance policy doesn’t carry limits as high as I would like?
If your insurance company’s maximum limits do not meet your needs, you should look into a commercial umbrella policy. An umbrella policy acts over and above your liability insurance policies, and typically minimizes the cost of each individual coverage. Consult with your insurance agent if you feel that your limits are not high enough.
How can I prove that my company carries general liability insurance?
Request a Certificate of Insurance from your agent. This is a short document that will show your coverages and limits to potential clients.
Does general liability insurance cover damage to clients’ code and other intellectual property?
Probably. Depending on the type of loss or claim, your CGL policy may cover damage to intellectual property. This may include the loss of a client’s data in a hack on your system. Consult your agent for policy specifics.
What is the difference between general liability and Commercial general liability?
There is no difference between general liability and commercial general liability insurance. These are two terms that both signify the same insurance coverage.
What is the difference between general liability and general aggregate?
General aggregate is a component of your liability insurance policy. Your policy has two “limits” built-in: “per occurrence limit”, which is the limit of coverage per claim, and “aggregate limit”, which is the total limit of all coverage per policy period.