We have previously discussed the different types of business insurance, as well as the need for cyber insurance coverage. In this blog, we are going to talk about a specific type of insurance, often considered the cornerstone of business insurance: general liability. A general liability insurance policy is a foundational type of business insurance that protects companies from financial losses due to claims of bodily injury, property damage, or personal and advertising injury caused by the business operations, products, or services. It's often referred to as Commercial General Liability (CGL) insurance. This is one type of business insurance your business definitely needs.
Why Do You Need a General Liability Insurance Policy?
For most businesses, general liability is essential because it helps manage risks that could cause significant financial setbacks for your business or even put your company into bankruptcy. Many clients, landlords, and vendors also require proof of general liability insurance before entering into agreements or contracts.
What Does General Liability Insurance Cover?
A General Liability policy typically provides coverage in the following key areas:
1. Bodily Injury - This covers medical expenses, legal fees, and potential settlements if someone is injured on your business premises or due to your business operations.
Example: A customer slips on a wet floor at your store and sues your business for their medical costs and lost wages.
2. Property Damage - This covers damage that your business causes to someone else’s property.
Example: A contractor accidentally breaks a client’s window during a project, and the policy pays for it to be repaired or replaced.
3. Personal and Advertising Injury - This Includes claims of defamation (libel or slander), copyright infringement, or false advertising.
Example: A competitor claims your advertising campaign unfairly disparaged their business and sues you for damages.
4. Products-Completed Operations - This covers liability claims related to injuries or damages caused by products you manufacture, distribute, or sell, as well as work you’ve completed.
Example: A product you sell causes injury due to a defect, and your business is held responsible.
5. Legal Defense Costs - This pays for the costs of defending your business in lawsuits, even if the claim is groundless or frivolous.
What is Not Covered?
While general liability insurance is comprehensive, it does not cover everything. Common exclusions include:
Professional errors: For this, you need Professional Liability Insurance (Errors & Omissions Insurance).
Employee injuries: These are covered by Workers’ Compensation Insurance.
Commercial auto accidents: Covered under a Commercial Auto Insurance Policy.
Intentional acts: Damages caused by deliberate actions are not covered.
Damage to your own property: For this type of coverage, you’ll need Commercial Property Insurance.
Who Needs General Liability Insurance?
General liability insurance is critical for most businesses, especially those that interact with the public, clients, or vendors. This would include businesses like retailers and restaurants that have high foot traffic and a higher risk of bodily injury claims. Construction businesses and contractors need this type of coverage because accidents on construction sites are unfortunately very common.
Consultants and freelancers are protected against advertising or personal injury claims by general liability insurance, and it provides small businesses and startups with financial stability and fulfills contractual requirements.
In Michigan, general liability insurance is not legally mandated for all businesses, although certain industries, like construction, may have specific requirements. However, while not universally required, general liability is highly recommended for all businesses. It's important to note that Michigan does have specific insurance requirements for businesses, including:
Workers’ Compensation Insurance: This is mandatory for employers with one or more employees working more than 35 hours per week, or those employing three or more employees at any time.
Commercial Auto Insurance: This is required if your business owns vehicles. Michigan mandates minimum liability limits for car insurance, including bodily injury and property damage coverage.
In addition, the federal government requires every business with employees to have unemployment and disability insurance.
How Much Does General Liability Insurance Cost?
The cost of a general liability policy varies depending on factors like industry and risk level, business size, the coverage limits required, and the business’s claims history. A smaller, lower-risk business with a clean claims record may have considerably lower premiums than larger companies in high-risk industries. For most small businesses, premiums typically range from $400 to $1,500 per year, depending on the level of risk.
A general liability insurance policy is a safety net for businesses and helps to mitigate the financial risks associated with accidents, lawsuits, and unexpected claims. By protecting your business against common liabilities, it allows you to focus on growth and operations without fear of devastating financial losses. Whether you’re a small startup or an established business, investing in general liability coverage is a smart and often necessary decision.
Contact us at Navisure Insurance Group if you have questions about the types of insurance your small business should have. We will be glad to talk with you and make sure that you have enough coverage and are in compliance with state and federal regulations for your business.
COREY VANDERMEER | PRESIDENT
Corey started his insurance career in the claims department for a national carrier and learned the basics of insurance coverage and how it’s applied. From there he decided to take the jump into sales and joined an independent insurance agency. Here he learned how to build coverage around the needs of each individual and cater to every client. When Corey decided to start an insurance agency he did so with the intention of simplifying the process of getting insured. With a focus on technology and simplicity; his goal was to create an insurance agency that was different from those currently dominating the market place.
When he’s not working, Corey enjoys golfing, fly fishing and spending time with his wife and kids. Together they enjoy traveling to Northern Michigan and to his wife’s hometown of San Francisco.