What Is General Liability Insurance?

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 Defenition

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

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Note: If your LLC offers a professional service such as accounting, legal advice, web design, etc., you may also need to invest in professional liability insurance. This will protect your business against malpractice claims and other covered risks.

General liability insurance is also a separate policy from workers’ compensation insurance. If you plan on hiring employees, your state requires that you hold a workers’ comp policy.

How Much Does General Liability Insurance Cost?

The average cost range of an LLC's liability insurance policy generally 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 your specific business:

  • 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)
  • Deductible

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.

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!