What You Need to Know About Liability Insurance in 2024

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As a business owner, one of the many responsibilities you have is planning for unexpected situations. This means ensuring that you, your business, and your employees are protected as much as possible. Having the correct insurance in place is key to achieving this.

Investing in insurance allows you to pass the risk of financial loss onto another party. But how do you know which policy is right for you?

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2 Quick insights into business insurance

Be sure to take these 2 points into consideration when buying your insurance.

  1. The truth is that no single policy will provide all the coverage that you need. You will require a bundle of separate policies for this. In this article, we will look at one of these policies, Liability insurance.
  2. Whichever insurance policies you purchase, be sure to tailor the coverage for your risks and budget. Each industry has their own set of risks that is common in that niche. However, each individual business has their own needs. What businesses have in common, though, is the need for liability insurance.

So, there are a variety of insurance policies that every business needs to ensure complete coverage. One of the most important is General Liability.

Investing in this insurance will not only help protect you and your business against potential lawsuits. It also sends a positive message to your clients, showing them that safety is of paramount importance to you.

What is General Liability insurance?

General Liability is a form of insurance that provides coverage in the case of bodily injury, personal injury, property damage, and advertising/marketing damages.

Commercial General Liability is one of the most important insurance products you can buy for your business. This is due to the broad scope of coverage you are afforded against a lawsuit’s negative impact on your business’s finances.

  • Bodily injury

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Coverage will kick in when someone not associated with your business – that is, neither you nor one of your employees – injures themselves on your business’s property.

For example, your business premises may have loose carpeting. If a customer trips on the carpeting and injures themselves, this is deemed bodily injury.

These are among the most common types of claims a business owner can face, resulting in significant pay-outs. A recent study found that customer slip-and-fall accidents constitute 10% of all liability claims, with an average pay-out of $20,000.

You should note that mental injuries and emotional distress can also constitute a bodily injury, even if there is no physical harm.

  • Property Damage

Should you or one of your employees accidentally damage someone else’s property while carrying out business-related activities, you are covered.

Say, for instance, one of your employees accidentally drops a tool on-site, and it damages the bespoke wooden flooring in a client’s home. The resulting claim is covered under property damage.

Pay-outs, on average, in these instances cost $30,000. Demonstrating the significant strain that a property damage claim can put your business under if you are not insured correctly.

  • Personal injury

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In the case where you or an employee cause damage to someone’s name or reputation, your business is covered. This can be written or visual defamation, known as libel, or verbal defamation, known as slander.

For example, you release an advertisement that unfavorably compares a competitor’s products or business to yours. In such a case, your competitor may sue you for libel.

If your business is faced with a lawsuit related to personal injury, Commercial General Liability can help cover your legal costs. This sort of claim is usually one of the more costly that a business can face, with reputational harm claims resulting in pay-outs that have averaged $50,000.

  • Advertising/marketing damages

In an instance where a competitor claims that your advertising or logo is too similar to theirs and claims that it is hurting their business.

An example would be you using an image found on the Internet. You may believe you have adjusted the image enough that it is no longer copyrighted. However, if the copyright holder disagrees, they may file a lawsuit for advertisement and marketing damages.

What other costs are covered?

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Commercial General Liability can help cover a lawsuit that arises from a claim covered under the policy. It covers not only the settlement but a variety of related costs, including but not limited to:

  • Legal representation for you, your business, and your employees
  • Witness fees incurred
  • Any evidence costs that may be incurred

The insurance can also help provide limited medical coverage in the case of bodily injury to a non-employee. This is triggered automatically following an accident and does not need legal action to kick-start it. It is activated on a no-fault basis, so you do not need to be found responsible for the accident for your insurance to start paying out medical coverage to the victim.

This coverage pays for all reasonable and necessary medical, hospital, surgical, ambulance, nursing, and funeral expenses that arise from an accident at your business’s workplace, or that arises from your business operations.

Factors that can affect your Commercial General Liability premiums

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Knowing what your insurance premiums are is a crucial component to keeping track of your overhead costs. Various factors can affect how much you pay, which include:

  • The type of business you own

Your business may carry risk factors, depending on the industry it operates in. An example of this is the construction industry. Construction businesses are assessed to have a greater risk, as there is a higher chance of workplace injuries and accidents.

If you have a construction business, your premiums will likely be higher than if you have a retail company.

  • Where your business is located

The location of your business affects your Commercial General Liability premiums in a variety of ways. The most important of these are the laws of the state in which your business is located.

If your state is known for awarding more significant damages in the case of claims, your premiums are likely to be higher than if you were located in a state that tends to award lower damages.

  • The number of claims filed against your business

If your business has had several claims filed against it, you are judged to pose a higher risk for insurance companies. Therefore, the more claims that you have, the higher your insurance premiums will be.

Is there anything this insurance does not cover?

Though Commercial General Liability protects you and your company from various claims, it does not cover all possible risks that a business undertakes. Some of the items not covered include:

  • Work-related injuries or illnesses that your employees may suffer.
  • Damage to your business property – property damage coverage under Commercial General Liability only applies to third-party property.
  • Intentional damage caused by a worker or an employee of your business.
  • Financial losses caused by criminal prosecution that may occur in cases of theft or embezzlement.
  • Lawsuits against a company’s directors and officers due to illegal actions, mistaken investments, gross negligence, or biased hiring.
  • If your small business manufactures, sells or serves liquor, this insurance does not cover loss or damages that result from a customer becoming intoxicated and injuring themselves or others.

However, you can insure your business against most of these situations by bundling your insurance coverage. By doing this, you add to your existing policy to provide additional coverage, which also helps you save on your premiums.

Another thing to keep in mind is, you may need to add other companies or people under your ‘additional insured’ on your policy. If, for example, you own a cleaning business frequently contracted by another company to carry out work. The company may require that you add them under your ‘additional insured’ in order to continue working with them.

Is General Liability a legal requirement?

The answer depends mostly on the type of industry that your business is in. Generally, if your business is in a low-risk industry, you are not legally required to carry this insurance.

It is to your business’s benefit to make sure that you have adequate insurance coverage. A survey found that more than a third of business owners – 35.2% – experienced an incident that could have led to an insurance claim. Claims covered under General Liability can be financially damaging to your business if you are uninsured.

Clients and other businesses may be less likely to work with you if you do not have proof of insurance. It assures them that you will be able to deliver on your work even in the case of an insurance claim against your company. Additionally, your clients are provided with some form of protection in case of injury or property damage.

Check with your insurance provider

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You should also check your state’s legal requirements for the industry in which your business operates. While Commercial General Liability is not usually a legal requirement, some states may require high-risk industries like construction to carry this insurance before they can legally carry out business.

Don’t risk the livelihood of your business. Speak to your insurance provider about obtaining General Liability coverage today.