How General Liability Insurance Works

If you own a business, you will be doing yourself a disservice if you do not have general liability insurance. Now, for those unfamiliar with this type of insurance, it is a form of business insurance that protects businesses against claims of injury, illness, libel or slander, and property damage.

What Kind of Businesses Benefit the Most From Having General Liability Insurance?

All small businesses should have general liability insurance as most don’t have enough resources to keep them afloat should they have to pay out of pocket to settle a compensation claim. According to an article published by Forbes, the following businesses that typically buy and benefit the most from having general liability insurance include the following:

Artisan contractors
Consultants
IT contractors
Janitorial service companies
Landscaping companies
Marketing firms
Real estate companies

These small businesses and sole proprietorships sometimes have no choice but to close their doors for good when they find themselves on the losing end of a slip-and-fall claim or claim for libel or slander. To help put this into perspective, we need only look at another article published by Forbes. It revealed the average settlement for a slip-and-fall claim is between $10,000 and $50,000, and claims involving a fatality can settle for hundreds of thousands or even millions. Without general liability insurance for business coverage, a business would have to pay these settlement costs out of pocket. The same applies to settlements that stem from claims related to libel or slander, which can be just as costly.

What Small Business Owners Should Know About Purchasing General Liability Insurance

Because there are so many options, purchasing general liability insurance can seem daunting. Bearing that in mind, it’s probably a good idea to speak with a knowledgeable insurance provider who can help you choose the right policy for your business or sole proprietorship. According to the Insurance Information Institute, those interested in purchasing general liability insurance for their business or sole proprietorship can choose from the following:

A business owner’s policy
A commercial package policy
Commercial general liability insurance as part of a stand-alone policy

Factors that can help small business owners decide if general liability coverage is right for them and, if so, the kind of coverage they should buy include the industry they operate in and whether or not they meet any of the following criteria:

If the business is open to the public, clients, or vendors
If you advertise or create any marketing materials for your business
If you have a professional social media account for yourself or your business
If you use a third-party location for business activity purposes
If you need insurance coverage to be eligible for contract work
If you employ temporary employees

A Closer Look at What General Liability Insurance Policy Covers

Now that we are a little more up to speed on general liability insurance, let’s take a closer look at the kind of protection such coverage provides to businesses and sole proprietorships.

Bodily injuries

These claims can stem from a customer slipping and falling on a wet floor or run-of-the-mill employee accidents. If the injury occurred in the workplace, the injured party has a right to pursue a personal injury compensation claim. And this is where it pays to have general liability insurance.

Property damage

These claims typically arise if an employee damages property belonging to a customer. An example could be a jeweler not using the correct tools to remove the back plate on a customer’s watch and damaging it while trying to replace the battery. In this case, the customer would be within their right to pursue a compensation claim.

Advertising injuries

These claims are common in class action lawsuits and usually stem from advertisements, marketing, or claims made about a product or service that are considered misleading.

If an individual files a lawsuit alleging damages, the owner of that business must file a claim with their insurer in kind. From there, the insurer will launch an investigation to verify the validity of that individual’s claim for damages and decide whether to approve or deny the claim. If the claim is approved, the insurer will calculate how much the compensation payout should be.

Conclusion

In summary, general liability insurance helps businesses compensate customers, employees, and others they’ve harmed without the threat of going out of business in the process.