Commercial general liability insurance is crucial for modern businesses. It’s an important type of business insurance that covers a range of potential issues, from illness and injury to property damage claims against your company.Also known as public liability insurance, it can protect a company against circumstances that could damage its reputation and finances.
Those without a policy not only riskfinancial harm but also might put customers and business partners off. Although it’scommon for businesses to have this cover, many budding entrepreneurs are unsure what it actually is – and, more importantly, what it covers.To help, this article details common questions on general liability insurance and answers them with new business owners in mind.
Is There a Difference Between General Liability Insurance and Public Liability and Insurance?
Despite being similar for the most part, there is a slight difference in geographical terminology.‘Public’and ‘general’ liability mean the same thing; however, the UK uses the former while the US generally utilizes the latter.
General liability insurance is a broader term for generalized insurance that, as its name suggests, covers general claims. These ‘general’ claims might be bodily injury, property damage, or issues stemming from faulty products your business sold.On the whole, this type of insurance covers the risks associated with directly or indirectlyworking with or selling to the general public.
What Does General Liability Insurance Cover?
In short, general business liability insurance covers claims against your company made by members of the public. Your legal protection will likely include coverage againstpublic-related claims such as illness or injurysuffered at your place of business or damage to people’s personal property caused by your company’s operations or a product you sold.
Suppose a customer tripped in your store, slipped on a wet floor at your company’s premises, injured themselves on a faulty product you sold, or if you or an employee damaged their property or something they own (such as denting their car with your company vehicle). In these cases, this type of insurance helps protect againstsuch claims and covers any resulting financial loss.
Financial loss could include expensive legal proceedings, repairs or replacements to damaged property, payouts for claimant illnesses or injuries for which your business is responsible, and any other monetary implicationsresulting from claims. With general liability insurance, these costs may be covered, and crippling financial ruin could be avoided.
Is General Liability Insurance a Legal Requirement?
Although highly recommended, general liability insurance isn’t required by law in the US or the UK. However, some US states do have general liability insurance in their licensing criteria for certain industries – especially construction developers and contractors. Because this is somewhatof a grey area,you should check your state’s licensing criteria.
How Much Cover Is Needed?
Every general liability insurance has a cover level, which is the maximum sum the insurer will pay out in the event of a claim. The cover level and type depend on the business and its industry, the work it does, the products it sells, legal regulations in the area the business operates, and whether clients require the company to have coverage.
How Do You Decide The Level of Cover?
The answer to this question depends on your business’s industry, scale, location, and risk assessment. Generally, it’s up to the business owner to decide how much coverage they want; however, the decision shouldconsider the maximum costthe company would face in dire circumstances.
Consider the scale of your work, the risks involved in your day-to-day operations, and any possible income loss your company might endure if an incident shuts you down for a while or a member of the public sues you. You’ll need to incorporate these potential situations and the monetary loss they incur into your policy type.