WHAT IS COMMERCIAL GENERAL LIABILITY INSURANCE?
Commercial general liability insurance is another name for business liability insurance. It covers a wide range of potential issues, including injuries to people other than your employees who enter your store or workplace, and damage that may occur to their property there. It also protects you against lawsuits that might come your way should one of your ads cause harm to a competitor. This coverage includes claims of libel or slander.
This type of coverage is necessary for most businesses, as it provides protection and coverage against many possible issues.
WHO NEEDS BUSINESS LIABILITY INSURANCE?
Nearly all businesses, regardless of industry, should have some level of business liability insurance. It can cover your business in many different scenarios, such as if a customer is injured inside your store or if your products cause bodily harm to someone.
All businesses can benefit from this layer of protection to help cover defense fees or potential judgments. Like other types of insurance, general liability is something you hope you never have to use, but if you don’t have it if and when you do need it, you could put your business in serious jeopardy.
HOW MUCH GENERAL LIABILITY INSURANCE COVERAGE DO YOU NEED?
This depends a lot on the type of business you have. Insurance providers offer a range of coverage amounts, from $100,000 to $2 million for one instance and $4 million for all instances. Many providers offer umbrella policies that can increase that amount to as much as $10 million.
You need to take a number of factors into account to determine how much coverage you need from your insurance policy. Your industry, location, revenue, number of daily visitors and type of workplace (e.g., a retail outlet, office or manufacturing plant) will help you determine the right level of coverage for your business.
HOW MUCH DOES GENERAL LIABILITY INSURANCE COST?
Like the amount of coverage you need, the cost of general liability insurance depends greatly on the type of business you have. Your company’s risk exposure, size, building construction, requested coverage amount, geographical location and number of employees, among other things, all factor into the rate you’ll pay for liability insurance.
Many insurance providers offer online quotes, meaning you can fill out some information about your business on their websites and receive estimates of your insurance rates instantly. This is an easy way to shop around for your insurance. When filling out these forms on some insurers’ websites, we found prices ranging from about $450 to $700 per year for liability coverage of $1 million for a retail store.
DO YOU REALLY NEED BUSINESS INSURANCE?
The quick and easy answer to this question is yes. Besides the fact that it protects your business from various claims that may come your way, some types of business insurance are required by law. Specifically, if you are hiring employees, many states require you to have workers’ compensation insurance. Barring that, it really comes down to choosing the insurance policies that are right for your business. At a minimum, all businesses should carry some liability insurance as well as property insurance.
WHY DOES A BUSINESS NEED LIABILITY INSURANCE?
Businesses need to be able to protect their assets and financially deal with potential legal issues. Liability insurance can shield your company from those costs, which is helpful in the event that your business is sued, whether it’s a third-party lawsuit, a slip-and-fall accident, or another incident that has the potential to hurt your business.
DO YOU NEED BUSINESS INSURANCE FOR AN LLC?
While your personal assets may be protected if you own an LLC, you still need business insurance, especially general liability coverage. Even though a potential lawsuit against your business may spare your personal assets, you are still putting your business in serious risk if you don’t have business insurance. An LLC faces much of the same dangers as businesses with other structures, so you should still protect it with the proper insurance policies.
IS OWNING AN LLC CONSIDERED SELF-EMPLOYMENT?
Yes, if you own an LLC, you are a self-employed individual. LLC owners, called members, are required to pay self-employment taxes.
WHAT HAPPENS IF SOMEONE SUES AN LLC?
If your LLC is sued, your business generally assumes the liability of the judgment, and you, the business owner, will not be held liable – meaning that your personal assets or bank account will be safe from any impact of the lawsuit. However, there may be exceptions if your LLC wasn’t formed or managed correctly, if you mixed your personal and business finances or assets, or if you signed contracts with personal guarantee clauses.
HOW MUCH DOES LIABILITY INSURANCE COST FOR A SOLE PROPRIETOR?
It is especially important to get liability insurance if you are a sole proprietor, because the legal responsibility for your business rests solely on you. The cost of general liability insurance varies wildly depending on the specifics of your business – it could be anywhere from $500 to $15,000 annually – so you’ll need to call at least two providers to get an idea of what you can expect to pay. The factors that affect price include your type of business, the state you do business in, your annual revenue, and whether you have past insurance claims.
WHAT IS NOT COVERED BY GENERAL LIABILITY INSURANCE?
General liability insurance only helps you with third-party lawsuits that involve customer injuries (including product and/or advertising liability) or property damage. For instance, if you or your workers get into an accident or damage company vehicles, your business liability policy will not cover it. It will not cover damage to your business if you or your employees caused the destruction. However, if a customer destroys your property, the liability policy will likely cover it.
Employee accidents (like a slip-and-fall incident on your premises) aren’t covered – you’ll need workers’ compensation for that – but if a customer hurts themselves in your establishment, your liability policy may help pay for their medical fees.
WHAT ARE THE DIFFERENT TYPES OF LIABILITY INSURANCE?
Several kinds of liability insurance are available for small business owners:
- Commercial general liability protects your business against claims of property damage, bodily injury, and reputational or advertising harm.
- Directors and officers (D&O) liability protects the personal assets of those in these roles (and their spouses) against claims by employees and customers.
- Professional indemnity insurance protects business owners who provide guidance or other professional services against lawsuits accusing them of errors.
- Cyber risk insurance covers your business’s liability for damages or losses due to a data security breach and mitigates recovery costs.
- Commercial crime insurance protects you against damages due to insider threats, like employees who have stolen money or forged documents.
WHO GETS PROFESSIONAL LIABILITY INSURANCE?
Professional liability insurance is essential for small business owners and independent contractors who provide professional services. Accountants, lawyers, doctors, architects, engineers, insurance agents, and other professionals looking for protection against claims of negligence should get this type of coverage.
Specific types of professional liability insurance include medical malpractice insurance, which protects doctors, and E&O insurance, which is used by professionals who provide advice or services.
Is general liability insurance tax deductible?
In general, yes. According to the IRS, you can deduct “the ordinary and necessary cost of insurance as a business expense, if it is for your trade, business, or profession.”