General liability insurance covers common lawsuits that arise from everyday business activities. It protects against customer injuries, damaged customer property, and accusations of defamation and copyright infringement.
Each of these are protections offered by general liability cover when applied to a third party, or someone other than an employee or owner.
Bodily injury has to do with harm, injuries, or damages done to a person’s body or self. When a person, other than an employee or owner, is injured in an accident involving your business, general liability insurance can help pay for medical and legal expenses associated with that accident.
Example: A client or passerby trips over a contractor’s toolbox and breaks a wrist. Being a serious injury, the medical bills begin to add up. If the injured party to sues as way to recoup their losses, a general liability policy can cover the cost of medical expense. If the customer refuses your assistance or seeks recovery beyond what is reasonable, your policy can help pay for hiring an attorney.
Third-party property damage refers to damages your business does to property owned by others. When property is accidentally damaged by a business, general liability insurance provides coverage to repair or replace the damaged property.
Example: A tree trimmer incorrectly secures a large branch and it falls on a neighboring fence. Assuming the damages are within the policy limits, general liability coverage can pay for some or all expenses associated with replacing or replacing the damaged fence.
Not all property damage or bodily injuries are attributable to your business happen inside a store, office location or worksite. If your business manufactures, distributes, or sells products, then it can be sued when its products become defective and cause injury to people or damage to property.
Example: A customer buys a latter from your store. While using the latter one of the latter’s legs buckles and the person suffers a serious injury from a fall off the latter. Blaming their injury on the faulty latter, the injured person sues your business and the manufacturer for damages. A general liability policy can typically cover the legal expenses associated with product liability lawsuits.
If someone sues a business owner or employee over slander, libel, or copyright infringement, general liability insurance can help pay for legal expenses.
Example: A maid at your house cleaning company tweets a rude comment about sloppy work done by a competing company. The tweet goes viral, and the owner of the competing business decides to sue for libel. Advertising injury coverage in general liability insurance can help pay for legal defense expenses and settlement or judgment costs when you’re sued over advertising mistakes.
If you are purchasing general liability insurance to fulfill the terms of a contract or lease, you need to make sure that your coverage meets the requested policy limits. The amount of coverage you need also depends on factors such as the size of your business, its industry risks, and the number of employees.
Most small businesses opt for the standard $1 million per occurrence / $2 million aggregate policy limits. This means the policy will pay up to $1 million to cover a single claim, with a $2 million limit for the lifetime of the policy (typically one year).
Professional liability insurance, also called errors and omissions insurance, can cover lawsuits over professional mistakes, including undelivered services and missed deadlines.
Example: A real estate agent accidentally lists a house as having hardwood floors when it really has laminate wood flooring. After the home is sold, the homeowner discovers the error and files a lawsuit. Professional liability insurance could help cover the agent’s legal costs.
Workers’ compensation insurance is the policy that covers medical expenses, physical therapy, and some lost wages for employees.
Example: A cook at a restaurant gets splashed with hot oil and suffers third-degree burns. Workers’ comp helps pay for the emergency room bill and part of his missed wages while he recovers.
A business owner’s policy, which combines general liability insurance with commercial property insurance, can help cover the cost of replacing stolen business property. It can also pay for repairing or replacing business property damaged by fire or certain weather events.
Example: A fire at an office complex damages a tax preparation company. Commercial property insurance can help pay for replacement computers, equipment, and building renovation costs.
Employment practices liability insurance (EPLI) can cover lawsuit expenses related to claims of harassment, discrimination, and wrongful termination.
Example: An employee at an engineering business files a lawsuit claiming partners are not assigning her to high-profile projects because of her ethnicity. An EPLI policy could cover legal expenses for the firm.
Personal auto insurance policies almost always exclude business use. Vehicles owned by a business must be covered by commercial auto insurance. Personal vehicles used for work purposes, along with leased or rented vehicles, can be covered by hired and non-owned auto insurance, which you can add to a general liability policy.
Example: An IT consultant driving his car to meet a client gets into an accident. His personal auto insurance policy won’t pay for damages, but a hired and non-owned policy would.
Liquor liability insurance covers lawsuits over incidents caused by people who became intoxicated at your business. That could include drunk driving, assault, and vandalism.
This policy is required for businesses that serve alcohol. You can purchase it as a standalone policy or add it to your general liability policy.
Example: After leaving a bar, intoxicated patrons vandalize the office building next door. Liquor liability insurance covers the bar’s legal defense costs when the office sues.
Like all insurance policies, your general liability insurance will contain some coverage exclusions. For example, it doesn’t afford coverage for intentional acts or willful negligence. In fact, these acts are likely criminal, and claims while in the act of a felony may also not be covered. If you do business internationally, you may also discover that it doesn’t cover intentional injury or property damage.
It’s important to read your policy carefully to see what is and isn’t covered and to fully understand your duties and responsibilities as the insured. If you want to add coverage, you can cover gaps in protection with endorsements. It’s always best to consult with an insurance agent to make sure your general liability policy includes all the coverage you need.
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