General Liability for Small Business

Liability insurance is one of the many kinds of coverage found in package policies

General liability is usually sold as part of a package of insurance and it’s just one of the many kinds of business essentials you’ll find in the Business Owners Policy (BOP) that most small to medium-size companies will need to purchase. BOPs give you big-business buying power by bundling and discounting the costs of many kinds of insurance that you need, such as property, liability and crime.

General liability
Business liability insurance should include what the limit per claim will be, a limit for the entire policy term (aggregate), a limit for fire legal liability and a limit for no-fault medical payments. Your policy also covers advertising and personal injury. Products and completed operations (such as for companies that install or repair) may be included in your policy depending on the kind of business you have.  

Fire legal liability
Liability insurance quotes include fire legal liability, which pays for property damage if a fire at your leased premises is found to be caused by your negligence.  Liability policies almost always include $50,000 of coverage, but the limit should be based on the replacement cost of your building and how much of it you occupy. If, for example, you rent 1/12 of a $9-million building, your limit should be about $750,000.

Products liability
If your business manufactures, sells, installs or uses products that are inherently dangerous, such as guns, power tools or fertilizer, your general liability insurance probably excludes products liability. You can buy products liability – at a much higher price -- as a separate policy, however. Products liability covers your business when customers or other people using your products are injured or their property is damaged.  

Personal and advertising liability
Personal and advertising injuries include invasion of privacy, libel, slander, intentional infliction of emotional harm, misappropriation of advertising styles and techniques and other kinds of economic or emotional injuries. Situations that could trigger this section of your policy include using a photo from the Internet without the photographer’s permissions, making fun of another business or product and collections practices that your customer sees as overly aggressive.  

Professional liability
If you are a licensed professional such as a dentist, architect or engineer, your general liability excludes claims that arise out of your professional services. Claims can include negligence, acts and the failure to act. Professional liability must be purchased separately and is often available through programs offered by professional groups and associations.

Employment practices liability
Employment practices is one of the fastest growing kinds of liability insurance claims in the U.S., and one that is almost always excluded from general liability policies. Harassment, discrimination in promoting and hiring, and many other types of claims related to employees and employment are covered by this separate policy. Employment practices liability is not a substitute for workers’ compensation, which covers employees when they are hurt on the job.

Umbrella/excess liability
Umbrella and excess liability policies add to your overall limits by providing an extra layer of coverage. Although they serve the same purpose, there are key coverage differences. Umbrellas fill gaps in coverage and raise your limits. Excess liability duplicates the terms of a specific policy or group of policies and raises limits, but does not fill gaps in limits.

Pollution liability
Pollution liability is almost always excluded from general liability insurance and should be purchased separately by businesses that can cause pollution (dry cleaners, computer chip manufacturers and mini marts with gasoline pumps, for example) and by property owners whose tenants might pollute.

Tips & Warnings
Liability insurance is complex and not always easy to understand. Consult your insurance agent if you need help reading your liability policy and understanding what it covers and excludes. 

All liability insurance policies contain exclusions that say what the policy does NOT cover. Read them carefully and call your agent if your policy excludes insurance you think you need. You may be able to purchase separate policies or pay an additional premium to have the exclusion removed. 

When shopping for business liability insurance quotes, give your agent a list of the coverage you need so you can compare apples and apples when trying to figure out the best deal.

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