One of the most important forms of insurance for any small business is general liability insurance. This type of business insurance coverage is your first and best line of defense in the event of third-party claims of bodily injury liability, property damage, and personal and advertising injury.
Unfortunately, accidents happen. Whether it’s property damage or a third party incurring an injury due to the work you’re performing, there are some things that are difficult to anticipate. Thankfully, you can plan for them with general liability coverage.
What does general liability cover?
Also known as commercial general liability (CGL) or business liability insurance, general liability 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.
Specifically, general liability insurance helps protect you against claims of bodily injury, property damage, and personal advertising injury.
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.
“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, if you were responsible for the fire. However, it wouldn’t cover the damage the fire did to your own building and equipment.
While general liability covers you against claims of third-party property damage and bodily injury, professional liability insurance protects you against claims related to errors or negligence. This type of insurance is designed to protect anyone who provides professional services.
For example, if you’re an IT consultant, 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. Professional liability insurance could help protect you.
If your employee suffers a workplace injury or illness, it won’t be covered by general liability insurance. That’s what workers’ compensation insurance 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’ comp 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 liability 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 driveway, 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?
If you work with clients in person, you should consider purchasing CGL coverage. If you perform a service or job for someone else such as repairs or painting, general liability coverage is a good idea. Even if your profession doesn’t involve physical labor, you’re probably still interacting with third parties. For example, a photographer is constantly on site at different locations. They’re also working alongside different production teams, clients, and models. Should their work accidentally result in third-party bodily injury or property damage, a general liability policy could help protect them from the financial consequences of a mishap.
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 hazard or foresee every risk. A few situations that can necessitate general liability coverage:
- 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 – as an independent contractor you’ll most likely need to carry general liability insurance to satisfy the requirements of the client’s contract.
- Applying for licensure or certification – some professions or licensing authorities have requirements that its practitioners carry general liability 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. Make sure you know of any state specific requirements to protect your business.
What other types of business insurance 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 professional advice to your clients? If so you also need professional liability coverage to protect against claims of negligence. Professional liability is also known as errors & omissions insurance.
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 insurance protects against injury or damage to third-parties (such as clients and their property). It does not protect your equipment and supplies which are considered first-party property. To protect your equipment you need business equipment insurance.
General Liability Coverage FAQs
How much does general liability coverage cost?
The cost of your general liability coverage is based on a few factors including where you work, what you do, how big your team is, and the length of coverage. Typically, liability coverage is sold on an annual basis, but Thimble gives you the option to pay only for the time you work. Learn more about how much general liability insurance costs and how to only pay for insurance when you need it.
How does general liability insurance coverage differ from professional liability?
General liability insurance protects your business from the physical damage or injury to third parties, whereas professional liability protects against claims of errors and omissions (negligence or mistakes) that result in monetary or reputational damage. Professional liability is needed by consultants or people who provide professional services.
How quickly can I get covered?
The time it takes to get a policy varies by insurance company. With Thimble, you can get covered on the way to your next gig by answering three questions online or through the Thimble app, without ever needing to speak to a broker. Proof of your policy will be sent to your inbox in less than 60 seconds in the form of a Certificate of Insurance (COI).
Does general liability cover my equipment?
General liability insurance does not cover your equipment. Typically you need to purchase a separate type of coverage known as inland marine insurance which protects your gear if damaged, lost, or stolen.
At Thimble our goal is to make business insurance simpler. That’s why we offer equipment insurance as an add-on which covers your gear, and we do not make you list items with values under $2,500 separately. You can choose between a $1000, $2500, and $5000 limit depending on how much coverage you need!
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?
Whether you’re a gig worker, small business just starting out, or your work is seasonal (such as a swim instructor) paying for an annual insurance policy may be an expense you can change. Traditional general liability policies are only available on an annual basis, but at Thimble we believe that you should only pay for insurance when you need it. So whether you need a liability policy for a few hours, days, a week, or month, you’re covered.
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