In the US alone, 75% of businesses are underinsured, while 40% of them have no insurance at all. In which category does your business fit? How many insurance policies do you currently have? Regardless of your answer, general liability insurance. Also known as business liability insurance, it protects your business against a wide array of risks.
In this guide, we’ll explain what it is, why you need it, what it covers, and what it doesn’t.
What Is Business Liability Insurance?
Business liability insurance is a policy that protects your business from third-party claims. Claims of property damage, bodily injuries, and personal injuries. These could be a result of business operations.
For instance, one of your clients sued your business after slipping and falling inside your property. The business liability insurance policy will pay for the claim.
Getting this policy is not a requirement by law, but every business should consider getting one. As long as you have a business that has an office or a brick-and-mortar store that’s open to the public, this insurance policy will come in handy. Additionally, you may require one in certain situations.
For instance, a landlord may require to see one before you sign a commercial lease. A creditor may need to see one before approving a business loan. A local government may also ask to see a commercial liability insurance policy from businesses in certain industries.
If you are to conduct business with other companies and get into a contract, they may also require to see this policy. It’ll reassure them that your business can handle a liability claim. Even if you’re not likely to be part of these scenarios, there’s a chance you’ll need a small business liability insurance policy.
Another business could sue yours for advertising practices infringement. A client could injure themselves on your property. In these cases, the insurance policy can protect you and pay for compensation.
What Does Business Liability Insurance Cover?
Different insurance companies may have several variations of the policy. However, general liability is based on standard forms published by the ISO or Insurance Services Office.
That said, general liability covers several types of claims. These include medical payments, bodily injuries, and damage to other people’s property. It also covers reputational or advertising injuries such as slander.
Commercial liability extends to a wide variety of lawsuits and claims. Claims that arise from business operations or services.
These essentially entail actions done by you, your employees, or your business partners. It means that when a third party makes a claim, the policy can offer compensation in several ways.
It can pay medical expenses for injuries and repair or replace damaged properties. It’ll also pay administrative expenses associated with the claim, pay for the legal fees, and pay the settlements or judgments.
What Business Liability Insurance Policy Doesn’t Cover?
General commercial liability insurance may be broad, but there are several risks that it doesn’t cover. For those risks, you will have to purchase different insurance policies. These risks include damage to your own property, professional negligence, and automobile claims.
For these risks, you need to get commercial property insurance, professional liability insurance, and commercial auto insurance. Workers’ compensation compensates employee injuries. You can combine your general commercial liability insurance with some of these policies.
You can combine it with business interruption insurance, or commercial auto insurance. You can also combine it with commercial property insurance or even cyber liability insurance in a BOP.
BOP or Business Owners’ Policy is a single policy that combines several policies. Everything comes in one package, which makes it convenient and affordable.
How Much Coverage Do You Need?
The amount of general liability coverage you need highly depends on several factors. The more coverage you need, the higher the costs are likely to be. On average, the most common coverage option splits between $1 million per incident and $2 million aggregate.
If you were to get this policy, the insurance company would pay up to $1 million for every claim and a total of $2 million as long as the policy is valid. This is usually enough coverage for most small businesses. However, if you are in the construction business and other similar industries, you will need a higher coverage limit.
The one thing you have to understand about a commercial liability policy is that it comes with a deductible for different damages. The deductible is the amount of money you have to pay out of your pocket for every covered incident or accident.
You pay for it before the insurance company pays out the benefits. The higher you pay the deductible, generally the lower your monthly or annual insurance premium will be.
How Much Does Business Liability Insurance Cost?
On average, commercial liability insurance policy costs can start at about $500 per year for small businesses. However, there are so many variables that go into play to determine the exact amount each business has to pay.
These variables include what industry the business is in, claims history, and business location. They also include business size, business revenue, risk management efforts, and the amount of coverage needed. Creditors may also consider how long the business has been operational.
Out of all this, the industry, amount of coverage, and business revenue, location, size, and age will have the most significant impact on the cost. It’s usually based on payroll, square footage, or gross sales of the business.
Business Liability Insurance: Everything You Needed to Know
This is everything you need to know about business liability insurance. One of the most important things you can do is compare different insurance companies to get the best offers. Regardless of what business you’re in, this is an insurance policy you should not overlook.
If you feel your business needs this policy, please get in touch with EPG insurance. We are a professional insurance company that takes good care of its customers, so please get in touch today!