When you first started your business you may have wondered just what is general liability insurance? You likely had to do some research to understand that your business needed general liability. But you likely didn’t fully understand what it is. Don’t you hate it when you look up a word in the dictionary, and the definition leaves you more confused than before you started? Sometimes that’s the way insurance definitions can be.
We can do better than that.
Here’s an explanation of General Liability Insurance that any small-business owner can understand:
Here’s an example of General Liability in action:
A landscaper puts down his hedge trimmer to run to his truck. It’s a hot day, and he has forgotten his water bottle on the front seat. After grabbing the bottle, he hears a scream and runs back to see his client’s child had played with the trimmers and dropped the blade on his foot, severing a toe in the process. The parents file a lawsuit for $150,000. General Liability Insurance pays for the landscaper’s lawyers in addition to the six-figure damages he owes the family.
Insurance is complicated, but one simple way to understand an insurance policy is to think of it like a contract. In fact, it is a contract. The insurance company offers you a service in exchange for your annual premium. In your policy, the insurance company outlines exactly what things it will pay for.
In the case of General Liability, the insurance company explains in your policy which lawsuits it will cover and which it won’t. The policy also sets a maximum amount of coverage called a “policy limit.”
Many small businesses start with $1,000,000 per-claim limit and a $2,000,000 per-term limit. This means the insurer can pay $1 million toward any one claim and can pay a total of $2,000,000 over the term of your policy, which is usually a year.
In this sense, your insurance policy is really a contract that describes how and to what extent you’ll be protected from lawsuits.
General Liability can help small businesses…
How does it do all these things? Well, for starters it offers financial security because you’ll know that one lawsuit won’t take down your business.
But more than that, General Liability is also important simply because clients, local governments, and landlords might require you to have it. For instance, in order to get an electrician’s license, a contractor might have to meet state requirements for Commercial General Liability Insurance.
General Liability Insurance is extremely common because many business owners need it to protect their company and sign important contracts. When businesses sign contracts with each other, they will often include a clause in the contract that requires the other party to have General Liability Insurance.
Because most business owners do one of more of the following:
General Liability protects you from the things that can go wrong when you engage in any of the above activities.
There are two ways to get lower premiums on General Liability:
This second option is only available to small businesses and is called a Business Owner’s Policy. Many small-business owners are quick to take advantage of the cost savings BOPS offer on two important insurance coverages.
Request a general liability insurance quote with a specialist. We shop your insurance with our A+ rated insurance partners.
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