Why Businesses Need General Liability Insurance
If you own a business, you should consider purchasing a general liability insurance policy. Also known as business liability insurance, commercial general liability insurance, or public liability insurance, this type of policy provides broad protection—covering everything from slip-and-fall accidents to lawsuits over copyright infringement.
Accidents can happen on your business property or as a result of your operations, no matter how careful you are. These incidents can lead to costly legal fees and medical bills. A general liability policy prevents you from having to pay out of pocket, potentially saving your business a significant amount of money in the long run.
Let’s go over the basics of what general liability insurance covers, why your business might need it, and how much it costs.
What Does Business Liability Insurance Cover?
General liability insurance covers the cost of common accidents that occur on your business property or result from your business operations.
It’s important to note that general liability insurance does not cover injuries or other harm to employees. These would be covered by workers’ compensation insurance, which businesses in Massachusetts are legally required to have.
Here are some of the costs liability insurance will cover:
- Bodily injury to non-employees: For example, if you leave landscaping equipment on the sidewalk and someone trips and falls, this policy will cover their medical bills.
- Damage to someone else’s property: If you accidentally damage a client’s or customer’s property, this policy will cover the cost.
- Reputational harm to other businesses: If one of your employees speaks negatively about a client and the client sues your business, this policy provides coverage.
- Advertising injury: If your business is sued for false advertising, this policy covers legal fees and defense costs.
- Copyright infringement: This policy covers legal fees for copyright-related claims.
- Damage to rentals: If you damage property your business rents, this policy covers repair or replacement costs.
- Products-completed operations: If your business produces a product or performs a service that results in a claim of injury or property damage, you’ll be covered.
What WON’T General Liability Insurance Cover?
As mentioned earlier, general liability insurance does not cover medical bills for employees injured on the job—this is covered by workers’ compensation insurance.
It also does not cover theft, as your business is considered the first party, and general liability insurance only covers third-party damage (such as harm to customers or clients). To protect against theft, you’ll need commercial property insurance.
Additionally, general liability insurance does not cover professional errors, such as mistakes made by an accountant or lawyer.
Is my Business Required to Have General Liability Insurance?
While general liability insurance is not required by law, it may be mandated in certain contracts depending on who you do business with. It might also be required to fulfill the terms of a lease. Either way, it’s a smart investment—even for LLCs.
General liability insurance is commonly purchased by small business owners, including:
- Architects
- Caterers
- Engineers
- Food truck owners
- Landscapers
- Painters
- Photographers
- Plumbers
In some cases, an employer or client may require your business to carry a certain amount of general liability insurance before allowing you to work for them—always review the details of your contracts carefully.
How Much Does General Liability Insurance Cost?
The median cost of general liability insurance is about $42 per month or $500 per year. The exact rate depends on your business type, number of employees, and other factors.
The cost of general liability insurance is typically tax-deductible as a business expense.
A general liability policy includes a deductible, which you select when obtaining a quote. The deductible is the amount you agree to pay out of pocket before your coverage kicks in.
What Other Types of Insurance Does my Business Need?
Depending on your industry, you may need additional insurance coverage, such as:
- Professional liability
- Workers’ compensation
- Commercial auto
- Tools and equipment
- Commercial property
- Business owner’s policy (this combines general liability and commercial property into one policy)
Businesses in high-risk industries may need to purchase excess and surplus lines insurance (E&S). Speak to an independent insurance agent at C&S to find out more.