What is General Liability Insurance? – Coverage Insights
What is General Liability Insurance?
Also commonly referred to as business liability insurance or more formally as commercial general liability insurance (CGL), General liability insurance protects your business against the cost of damage that might be caused by you or an employee while you are providing a business service on someone else’s property. General liability insurance coverage includes provisions for property damage and bodily injury for a third party, but does not cover damage to your own equipment or property or bodily injury for yourself or your employees. Damages to others due to libel or slander are also typically covered within the limits of a general liability policy.
General Liability Insurance is intended to protect your business against accidental damages, those not intended. Damage caused by reckless or malicious actions may not be covered losses. Be aware that not all insurers that offer general liability insurance will offer it for all business types. Some industries may be excluded and some may face higher premiums based on industry type. Premiums are determined largely by risk, so expect industries that have a higher risk to pay a higher annual premium.
If your business is very focused in the service it provides, it may be easier or more affordable to secure coverage. For example, some insurers may insure an electrical contractor, but not a general-purpose handyman business, simply because the risk for the latter isn’t easily understood and could change by the day. A handyman might be performing a broad range of services, becoming difficult to rate as a risk for a general liability policy.
Premiums for general liability insurance may also be determined in part by business volume. Two businesses within the same industry, one with $10,000 in annual revenue and a second with $100,000 in annual revenue, may pay a different rate if all other rating factors are equal. Other rating considerations may include gross payroll or even square footage, in the case of general liability insurance for a church, for example.
Certificate Of Liability Insurance
When doing work for other businesses, many contracts will require a Certificate of Liability Insurance, which is provided by the insurer upon request and provides evidence that your business is insured as well as providing limited details of the coverage such as coverage limits, effective dates, and the types of coverage you have. When using a Certificate of Liability Insurance to document your general liability insurance coverage, your customer becomes a certificate holder and is named on the certificate. Some commercial customers may also require that their company be named as an additional insured on the Certificate of Insurance.
Accidents can and will happen in the course of any business and that’s why general liability insurance becomes important. A landscaping business can have a general liability insurance claim for damage to a structure on the property or an outside air conditioning unit, or a network technician can have a claim for damage to existing equipment while working in tight quarters. No matter what type of business you have, there is risk to other people’s property, although the amount of risk varies.
Mistakes happen, as do accidents. However, general liability insurance is not errors and omissions coverage, and is designed to cover property damage or bodily injury caused by you or an employee in the course of providing a business service for a customer.
General Liability Insurance Purchase Considerations
In most cases, general liability coverage can be purchased on its own or as part of a more comprehensive business owners policy, which offers coverage extending beyond property damage or bodily injury for other parties.
When purchasing your general liability insurance coverage, whether if it is part of a larger policy or a simpler policy to meet your liability needs, give careful consideration to the coverage amounts you choose for your policy.
Your business doesn’t have to be sued to have a general liability insurance claim. Most general liability claims are settled without the court system by demonstrating the damage or injury and by providing invoices to document the amount of the loss. While most covered losses are relatively small, larger losses can occur in any business.
Many times, the first time a business purchases general liability insurance is when it’s required to complete a contract. In those cases, the contract requirements will guide the minimum amount of coverage you’ll need to purchase. However, the amount required by the contract may not be enough to meet your long-term needs, so consider how much coverage your business might need separate from any contractual requirements. A large liability incurred without the proper coverage could force a closure for many small businesses. General liability insurance may be less expensive than you might expect and the cost of not having the proper amount of liability coverage can be much greater.
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Disclaimer: This article is provided for informational purposes only. The information provided herein is not intended to be exhaustive, nor should it be construed as advice regarding coverage. Eligibility for coverage is not guaranteed and limited to the terms and conditions contained in the applicable policy