Just like insurance policies for your car and home protect your personal assets, general liability insurance safeguards your business and its resources.
Depending on what kind of business you conduct, you may need additional insurance coverage, but every small business should start with a general liability insurance policy.
In this guide:
- What Is General Liability Insurance?
- Who Needs General Liability?
- Cost of General Liability Insurance
- Frequently Asked Questions
What Is General Liability Insurance?
A general liability insurance policy is the foundation of your small business insurance coverage, which may also include things like workers’ compensation, an umbrella policy and commercial vehicle insurance. It generally covers your business liability, such as public injury, copyright violations and lawsuits.
What General Liability Covers
Your actual insurance coverage depends on your policy, so work with your insurance company or broker, and read the policy carefully to get what you need.
General liability typically covers your business and any business that subcontracts you against costs associated with:
- Non-employee bodily injury.
- Property damage.
- Libel, slander and copyright infringement.
- Lawsuit expenses, such as investigations, attorney’s fees and settlements.
- Advertising injury (financial loss caused by your ad).
A public liability insurance policy also covers some of these, but its coverage doesn’t extend as far as general liability.
Just as a foundation isn’t a house by itself, a general liability policy doesn’t cover all your business insurance needs.
General liability typically does not cover:
- Company vehicles.
- Employee injuries.
- Punitive damages (in case of a lawsuit).
- Professional mistakes, such as malpractice.
These areas of coverage are also important, so discuss them with your agent to determine the best policies to meet your needs.
Who Needs General Liability?
Every business should have general liability insurance, including home-based businesses, small businesses, sole proprietorships and even independent contractors.
The insurance protects your business — however big or small — from financial harm if a customer or client sues for something like injury, copyright infringement or property damage.
Businesses That Need Another Kind of Coverage
You may need additional liability insurance coverage on top of general liability, depending on what your business does. For example:
- If you manufacture or sell a product, you’ll need product liability insurance.
- If you provide a service based on your expertise, you may want professional liability insurance.
- If you run the business out of your home, you may need home-based business insurance for certain liability coverage.
Cost of General Liability Insurance
General liability insurance cost varies similar to your auto insurance. How much coverage you want, whether you’ve made previous claims, your industry and your business’s annual revenue all affect your insurance cost.
Generally, a $1 million insurance policy costs a few hundred dollars annually. HowMuch.net offers these example costs for small businesses by type of service:
- Hair salon or barber shop: $450
- Cable or satellite dish installer: $550
- Retail store: $750
- Computer repair service: $400
Frequently Asked Questions
Why do you need general liability insurance?
Structuring your small business as an LLC or corporation offers some protection for your personal assets in case of lawsuits, but they leave your business assets vulnerable. General liability insurance steps in to protect your business assets.
Some states also require some kind of liability insurance.
What is the difference between commercial liability and general liability?
There is no difference. General liability insurance is sometimes referred to as:
- Commercial liability insurance.
- Commercial general liability insurance.
- Business liability insurance.
- Business general liability insurance.
Is general liability insurance required by law?
Business owners are not legally required to purchase general liability.
Depending on your business, you may be legally required to purchase other types of insurance. For example, the federal government requires any business with employees to purchase workers’ compensation, unemployment and disability insurance.
What is proof of liability insurance?
A certificate of insurance is like a receipt or proof of purchase for your liability insurance policy.
A company that subcontracts with you may ask for proof of insurance to confirm its covered for your work. Contractors you hire may also want to see it to confirm you can cover injury or property damage they experience.
To get a certificate of insurance, you can contact your insurance provider. Typically, you can find the certificate online, through your account at the provider’s website. But you may have to email or call the company to request the certificate.
Is general liability included in a BOP?
Yes. A business owner's policy typically covers your basic business insurance needs, including property and general liability insurance. It can be a good starting point for startup or small business owners, because it bundles your insurance needs together, simplifies the buying process and could save you money.
Is business insurance tax deductible?
Yes, you can deduct the cost of commercial insurance premiums and fees as a business expense.
Understand Your Insurance Options
General liability insurance is the starting point for commercial insurance. It costs around $500 per year, depending on your industry and other factors, and can protect your small business in case of lawsuits from the public, contractors, customers or clients.
Our insurance specialists understand that every small business is unique, and we can help you understand your insurance options and translate your needs into affordable coverage. To get a competitive insurance quote, just enter your ZIP code above, and click “Get Quote” to hear from one of our specialists.