What Is General Liability Insurance?
General liability insurance, also referred to as commercial general liability insurance (CGL) and business liability insurance, offers your business protection. In the event of advertising and personal injury, bodily injury, and property damage claims, your liability insurance policy covers the cost. It also helps to pay for legal expenses should a claim lead to a lawsuit, as well as medical expenses.
What Does General Liability Insurance Cover?
Having a GL policy for your business is absolutely crucial. General liability insurance protects you in the event of:
- Advertising and personal injury: This refers to any damage that has been done to a person’s character, reputation, or position in the community. A GL policy protects the insured against false arrest, libel, malicious prosecution, slander, and wrongful entry, eviction, or invasion of privacy.
- Bodily injury and property damage: These terms refer to any bodily injury (including emotional and mental distress) or property damage to others. Liability insurance covers any damage caused by your business, employees, products, and work to a client/customer.
- Medical payments: General liability insurance not only covers you in the event of someone being harmed by or because of your business or property, but covers some of the medical expenditures as well. A GL policy covers the costs of an individual who is injured or killed on the premises of the insured. Covered items include ambulance costs, funeral expenses, hospital charges, medical expenses, professional nursing costs, and surgical charges.
General liability insurance also covers the cost of defending or investigating a suit and the cost of settlement. It is important to note that a general liability insurance policy does not cover auto accidents, employee injuries, intentional acts, professional mistakes, punitive damages, or workmanship.
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Levels of Coverage
There are different levels of coverage for general liability policies. Some may purely include premises coverage, protecting the business only in the event that something occurs at the physical location during operating hours. Others offer premises coverage, but also include bodily injury and property damage.
There is also excess liability coverage, which covers claims that exceed the limit of your GL policy or items that your GL policy does not cover. Businesses may purchase employment practices liability coverage, as well, which offers protection from discrimination, sexual harassment, and wrongful termination claims. The extent of your coverage depends on your needs and the policy you decide to go with.
Always be sure to clarify and differentiate between a claims-made policy and an occurrence policy. With a claims-made policy, you are provided coverage for a specific amount of time. Any claims made within that time, whether the event itself occurred during that time or not, are covered. With an occurrence policy, claims are covered during a set amount of time as long as the event occurred within that same set time. If an event happened outside of that time, the claim is not covered.
It is possible that you will need to name other companies or subcontractors as additional insured under your GL policy. For example, if you hire a cleaning service for your business, you may need to add them as additional insured in the event any claims may arise from their work.
What Is the Cost of Liability Insurance?
It is difficult to provide an exact cost for liability insurance, as there are multiple factors that affect the final price. Your annual revenue, history of claims, industry you work in, number of customers, and the years you’ve been in business all play a role in determining cost.
- General liability insurance has an average cost between $500 and $3,000, with prices varying based on the factors listed above and the type of coverage you purchase.
Your industry is one of the biggest determinants of your policy cost. Industries with a higher risk pay more than those that are low risk. For example, a phone center has vastly different liability issues than a delivery company.