If you operate one of the estimated 33.2 million small businesses running in the United States, getting the right business insurance is usually a must. One policy that most – but not necessarily all – companies need is general liability insurance.
Since general liability insurance often costs around $500 per year, some small business owners may wonder if the benefits of having the coverage make the expense worthwhile. Here’s a look at the benefits of general liability insurance, what businesses do and don’t need it, and how to determine your coverage needs.
What Businesses Benefit?
General liability insurance protects small businesses against specific types of claims made by third parties. The types of covered incidents usually involve harm to third parties, including bodily injury, property damage, and reputational harm.
The benefits of having the policy are primarily financial. General liability insurance can provide funds for attorney fees, making mounting a defense more affordable. Additionally, it can address medical bills related to bodily harm claims and judgments connected to damaged property and successful claims of libel, slander, or other reputational damage. Further, many assist with claims related to copyright infringement, such as accusations of using another party’s images in advertising without permission.
What Businesses May Not Need It?
In most cases, general liability coverage is beneficial for any small business. However, there are situations in which it’s potentially unnecessary. For example, bodily harm isn’t a concern if your company doesn’t allow non-employees onto your work property. Similarly, if your company doesn’t engage with a customer’s property – such as doing modifications to items they own or handling installations in their homes or businesses – property damage-related claims aren’t likely.
However, the coverage for reputational harm, advertising injury, or copyright infringement can benefit nearly any business. Without general liability insurance, that coverage would need to come from another type of policy. If that’s possible, then using those insurance alternatives could make general liability insurance unnecessary.
How to Determine Coverage Needs
How much general liability insurance your business needs may depend on several factors. Essentially, you need to identify the risks associated with your company and its liability, assess the potential costs relating to possible incidents, and select a coverage level that offers the proper amount of protection.
Many small businesses find that the base coverage is sufficient, as that usually includes $1 million per incident with an annual claim limit of $2 million. However, the precise needs of any company can vary. Some professionals or industries come with higher levels of risk, which could make more coverage a necessity. For example, construction companies often require more, as they’re working on a customer’s property, and the work involves dangers to third parties that aren’t present in many other sectors.
In many cases, it’s best to either do a significant amount of research into the risks associated with your industry and operation or consult with a reputable, neutral insurance professional. By using those strategies, it’s possible to determine if the base coverage is sufficient or if more is needed.
