Running a small business can be rewarding. But it’s also risky, particularly when you bring third parties like customers and contractors into the mix. Accidents happen. People slip and fall. Things get broken. All of which could result in a lawsuit. And should that happen, your business’ ability to operate may be put in jeopardy. As a small business owner, a liability claim might just turn your entrepreneur dreams into your worst nightmare.
That’s why one of the most important forms of insurance for any small business owner is general liability insurance. Also known as “commercial general liability insurance (CGL)” or “business liability insurance,” this basic form of insurance coverage is your first and best line of defense in the event of a third-party lawsuit involving bodily injury liability or property damage.
Unfortunately, lawsuits have become a commonplace occurrence, and no industry or business type is completely in the clear. In a litigious world, it’s vital that you shield your business from potential third-party claims related to the above types of damages.
What does general liability cover?
General liability coverage protects your business from the inherent risks of dealing with third parties. A third party could be your customers, contractors, visitors, bypassers, or delivery workers.
General liability insurance provides investigation, defense, and settlement for claims from bodily injury, property damage, and personal advertising injury.
In most cases, your CGL policy will protect you from the following:
Your workplace may have slip and fall hazards. Should a client injure themselves while visiting your workplace, you could be liable for their medical expenses as well as pain and suffering.
You may visit your client’s home to perform your services. Should you damage their property during the course of your work, you could be responsible for replacing or repairing the damaged property.
Personal + Advertising Injury
A part of your job involves advertising your company to grow the business. Should one of your rivals claim that your advertisement damaged their reputation, you could be liable for defamation.
Should the above scenarios occur, you could face a lawsuit, and your policy can provide a legal defense and cover court costs in addition to paying the damages described above.
“General liability protects against accidents which cause bodily injury or property damage.”
What does general liability insurance not cover?
Although a CGL policy protects you from a ton of risk, it doesn’t cover everything. There are several important things that aren’t included.
Property damage to your own property
Should something happen to your personal or business property, it wouldn’t be covered by a general liability policy. For business-related losses, you’d also need commercial property insurance.
For instance, if a fire were to break out at your business, your general liability policy might pay for the damage to the neighboring businesses. However, it wouldn’t cover the damage the fire did to your own building and equipment.
If you get paid for your advice, your general liability policy wouldn’t protect you from a claim that you made a mistake or were negligent alleging that your guidance caused a client financial loss. For that, you’d need professional liability insurance.
For example, if you’re an IT professional, you may be hired to improve a company’s cybersecurity. Should a breach successfully occur in spite of your best efforts, you could be held liable. A professional liability insurance policy could help protect you.
If your employee suffers a workplace injury or illness, it won’t be covered by a general liability insurance policy. That’s what workers’ compensation is for. Every state in the country besides Texas requires that you acquire workers’ comp if you have employees.
For instance, if your employee got hurt while on the job, a workers’ compensation policy could help pay for the hospital costs, lost wages, and other related damages.
If you or an employee uses a vehicle for work purposes, it could result in an accident, causing damage to a third party. However, that wouldn’t be covered by your general liability protection. Rather, it would be covered by an auto insurance policy (which is also legally required in most states).
For example, if your tools fell from the truck bed while it was parked and damaged a client’s vehicle, the general liability insurance policy could help cover the damages. But if your work vehicle bumped into the client’s vehicle and damaged it, that would be covered by the auto insurance policy.
Who needs general liability coverage?
Unfortunately, lawsuits have become a commonplace occurrence, and no industry or business type is completely in the clear. In a litigious world, it’s vital that you shield your business from potential third-party claims.
You should consider purchasing general liability insurance coverage if you work with clients on a face-to-face basis or at a client’s place of work, your own place of work, or a third-party location.
When do you need proof of general liability insurance?
No matter what kind of work you do and what goods or services you provide for your customers, there’s always a chance that someone can get hurt. You simply can’t eliminate every single physical hazard or foresee every risk. Here are a few situations that can necessitate general liability insurance:
Obtaining an office lease – Professionals and companies that rent a commercial space often need to provide proof of general liability insurance to qualify for a lease.
Contracting with large companies – Similarly, large corporations that contract out jobs to smaller businesses almost always require these independent contractors and firms to carry general liability insurance.
Applying for licensure or certification – Finally, there are professions that face legal requirements for general liability via licensure to practice. Depending on licensing laws in the states in which they do business, some businesses may need to obtain general liability (and other) insurance.
How quickly can I get covered?
By now, It’s probably clear how important general liability insurance is for your business. And that you need a policy.
Maybe you’ve been called in for a last minute gig? If so, you may be required to show proof of insurance to land the job or even just to submit a bid.
With Thimble, you can get a Certificate of Insurance (COI) in an instant. Literally, it takes less than 60 seconds.
Just click “Get a Quote” or download the Thimble mobile app, answer a few quick questions, click once more to purchase, and your COI will immediately be sent to your email inbox!
Even better, Thimble is flexible business insurance that is available by the day, week, or month. You can purchase or make changes on the go with the Thimble app, and you’ll arrive at any job site with proof of coverage in hand.
Thimble lets you choose between a policy with a limit of $1 million dollars or $2 million dollars. While the decision is up to you, most businesses opt for the higher limit in order to have double the coverage from risk.
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What other types of liability coverage do I need?
A general liability policy is one of the most important safeguards any small business can implement. It covers you from the potential dangers of interacting with third parties, however, depending on your line of work you may also need to consider other types of insurance.
Professional liability insurance
Do you offer expert advice to your clients? If so you also need professional liability coverage to protect against claims of negligence.
Workers’ comp insurance
If you have a team, 1 employee or more, you need workers’ comp insurance to protect against work-related injuries and illnesses.
General Liability Coverage FAQs
Does general liability cover my equipment?
General Liability insurance itself does not cover your equipment, but every General Liability policy through Thimble includes Business Equipment Protection Insurance (if it’s a Thimble Monthly policy). You can choose between a $1000, $2500, and $5000 limit depending on how much coverage you need!
How does general liability coverage differ from professional liability?
A general liability policy protects your business from the damages or injuries it causes to third parties, whereas professional liability protects against claims of negligence or mistakes that resulted in monetary or reputational damage. Professional liability is needed by consultants or people who provide advice as a service.
What if I need to change my general liability policy limits?
Thimble makes it easy to make a coverage change, as fast as your needs change. Simply log in to the Thimble app, select your active policy, and select “Limit” to increase to the $2M option. Use this guide to edit your policy limits.
If I hire subcontractors, are they required to have their own general liability policy?
While they’re not required by law, it’s recommended your subcontractors have their own policy or are added to your CGL policy as your Crew. Keep in mind your client will probably ask for proof of insurance for any subcontractors you hire to work on their project.
My schedule is not consistent, do I need general liability coverage all year round?
Not anymore. At Thimble we believe that you should only pay for insurance when you need it, whether that’s by the hour, day, week, or month. Are you a DJ who only works on the weekends? No problem, we’ve got you covered.
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