Your small business is likely your greatest asset. Small businesses can own property and vehicles, but it is the business’s ability to generate income which matters most. And in today’s litigious world, even the smallest lawsuit can bring your business to a grinding halt.
Every day, your business faces possible legal liability to another person or business due to an accident or negligence. If a lawsuit for bodily injury or property damage were brought against you, a General Liability insurance policy would be there to protect you.
What is Covered
General Liability policies cover a broad range of claims. They are not, however, intended to cover all types of exposures. Think of your General Liability policy as the foundation for your overall insurance and risk management program providing coverage for:
Bodily Injury – An individual at, or because of, your business suffers an injury for which you are legally liable.
Property Damage – You cause damage to someone else’s property while in the course of operating your business.
Personal Injury – Your business impedes on an existing copyright, falsely advertises, or is sued for libel or slander.
Rental Property Damage – You, an employee, or anyone invited to a location rented by you causes damage to the property.
Medical Expenses – Reasonable expenses paid for bodily injury caused by an accident, regardless of fault.
General Liability insurance is there to protect you and your business from the day-to-day operation. Although premiums will differ depending on the type of business insured, the types of general legal claims which can be made against small businesses are very similar.
What is Not Covered
General Liability insurance should be the first level in your business’s insurance program. But it does not mean your business may not have additional exposures. In fact, it is highly likely other insurance policies will be required to add the protection you need.
Although General Liability insurance is a start, there are notable exclusions including:
Damage to your property
Uses vehicles of any kind
Uses aircraft or watercraft
Loss of personally identifiable information
Damage to property of others in your custody
Regularly visit with your insurance agent to evaluate your business’s insurance needs. Every small business is different, and your exposures can and will change over time.
Available Limits of Insurance
Every insurance policy sets the maximum amount payable by stating the limits of insurance. For most small businesses, the limit of insurance for bodily injury and property damage is $1,000,000 per occurrence. In addition to the per occurrence limit, policies will have an aggregate limit typically twice the per occurrence limit. This is the maximum amount a policy will pay in a single policy year, regardless of the number of occurrences.
In addition to the limits provided for bodily injury and property damage, separate limits will apply for personal advertising injury and medical payments. Although personal advertising injury limits commonly equal the primary limit of injury, the medical payment limit is usually very low at either $5,000 or $10,000. Finally, varying limits are provided for damages you are liable for to your landlord’s property.
Cost of General Liability Insurance
The premiums paid by small businesses can vary widely. Each small business presents its own set of exposures to an insurance company. Insurance companies underwrite policies based on a number of factors including:
Years in business
Scope of business
Previously filed claims
When quoting General Liability insurance for your business, insurance agents will first determine your class of business. The class of business will have an assigned actuarial rate, which is used as the basis for your premium.
The base rate is then credited or debited for the other rating factors, such as the number of years in business and your previous claim history. After applying any available discounts, taxes, and fees, your final premium is determined. While starting premiums begin as low as $350 per year, the average annual premium small businesses can expect to pay commonly average about $1,500.
Peace of Mind
The premiums paid for General Liability insurance is a cost of doing business. Unfortunately, there are still many small business owners who believe a claim won’t happen to them. What uninsured small businesses may not realize is the cost of not having General Liability insurance may be the costliest mistake they make. Consider the costs associated with a typical claim:
Cost to investigate the allegation
Cost of filing a reply to the lawsuit
Cost of final judgment or settlement
Not to mention time away from your business and the stress of being sued. The costs become exponentially higher if you hire legal counsel on your own to tackle the claim brought against you. Purchasing a General Liability policy for your small business is purchasing peace of mind.
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