General Liability Insurance for Small Businesses

According to the U.S. Small Business Administration, only 48.8% of employer companies stayed in business for at least five years between 1994 and 2018. Small businesses face many challenges – although not due to a lack of customers. Unexpected losses (including expensive lawsuits) can push businesses into insolvency. General liability insurance for small businesses provides important protection, but some small businesses need additional coverage.

General Liability Insurance and a Business Owner’s Policy

Commercial general liability insurance covers certain third-party claims involving bodily injury or property damage that occurs on your premises or is caused by one of your employees or products. General liability insurance may also cover claims related to libel and slander.

Many small business owners secure their general liability insurance in a bundle package called a business owner’s policy (BOP). A BOP typically combines commercial property insurance and general liability insurance into one policy. Commercial property insurance often includes business interruption coverage, which may also be part of your business owner’s policy.

General Liability Covers Many Common Claims

General liability insurance provides critical protection business owners need.

It may cover many common scenarios, such as:

• A puddle forms near your front door. Before you have the chance to mop up the water or put out a sign, a customer slips and sues you for medical costs and lost wages.
• One of your workers breaks an expensive sculpture while working in a client’s house and the client sues.
• One of your workers runs an electrical cord across the hall while working in a client’s house. The client trips over the cord and sues for medical expenses.
• Your employee creates a “funny” social post insinuating that all the other restaurants in town give customers food poisoning. One of your competitors doesn’t think this is funny and sues for defamation.

General Liability Doesn’t Cover Everything

General liability insurance is a core coverage for small businesses, but it doesn’t cover everything.

For example, it would not cover the following scenarios:

• One of your workers is injured on the job. General liability insurance covers third-party claims of bodily injury but not injuries to you or your employees.
• One of your workers causes a car crash while making a delivery. The other driver is injured and both cars are damaged. General liability insurance does not cover incidents involving automobiles.
• You overbook your catering business and have to cancel on one of your clients last minute. The client sues you for breach of contract. General liability insurance covers bodily injury and property damage but not issues related to contracts.
• You run an accounting firm. You forget to file an important tax form for a client, resulting in financial loss. General liability insurance does not apply because it does not cover professional errors or financial loss.

Filling in the Gaps with Additional Insurance Products

As a small business owner, the last thing you want is to face a lawsuit without insurance coverage. Although your needs may vary depending on the nature of your business, some common insurance types to consider include:

• Commercial Auto Insurance: In addition to securing coverage for any cars your company owns, you may need hired and non-owned coverage for other cars used for work purposes.
• Workers’ Compensation: Most states require workers’ compensation coverage for the majority of employers.
• Professional Liability Insurance/Errors and Omissions Insurance: If you provide professional services, you may need coverage to protect you in the case you’re sued for financial losses stemming from negligence, breach of contract, errors, or omissions.
• Employment Practices Liability Insurance: If you have employees, this insurance will provide coverage for common claims, including wrongful termination, discrimination, and harassment.
• Directors and Officers Liability Insurance: D&O insurance provides protection for your company and board members or officers, who could be held personally liable for their actions.
• Cyber Liability Insurance: As data breaches and cyberattacks become more common, cyber liability insurance is growing in importance.

An insurance broker can help you assess your needs and determine which types of insurance make sense for your business. You’ll typically need general liability insurance for small businesses, often as part of a business owner’s policy, as well as some additional coverage types. Heffernan offers tailor-made insurance packages for small businesses. Learn more.