In the early days of small businesses, many owners want to keep costs as low as possible. One of the ways that they do this is to avoid purchasing insurance plans. While this can save money, it also opens the company to a lot of very damaging, very expensive to handle risks. If you are sued, which is a possibility from the first day you are open, it could cost you your business. Let’s take a deeper look at general liability insurance and why every small business needs it.
What is General Liability Insurance?
General liability insurance is a broad policy that covers several types of risks for businesses. These include damage to other people’s property, injuries to customers and other non-employees, and liability for defective products or services. It even helps with the costs of defending yourself in court or paying damages to other parties.
Do Small Businesses Need GL Insurance?
Yes! Your small business needs general liability insurance.
GL insurance is seen as the most basic type of insurance that you can have and is recommended for businesses of every size. It is even mandatory in some places. The risk of being sued for the types of problems that GL insurance covers is high for every type of business and you need to have a policy in place to protect your business.
Why is General Liability Insurance Important for Small Businesses?
The primary reason why all companies should carry a general liability policy is that it provides coverage for claims that are not specifically covered by other types of policies.
For instance, if an employee accidentally sets a warehouse on fire and burns a product, and that product is owned by another company, general liability will cover the cost of damages to the other company and its product. While an automobile or workers’ compensation policy can cover the employee for medical expenses, general liability will cover the cost of repairing or replace the damaged items.
General liability policies also have a broader coverage period than most other policies because they are considered to be a required policy by most businesses. The extra cost of a general liability policy is worth the coverage it provides because it covers so many different types of risks.
Risks Covered by GL Policies
General liability policies cover several risks that are not covered by other types of insurance policies. These include:
Property Damage
This part of the policy covers damages to another person’s property that your employees or contractors cause during the course of business. For example if a delivery person damages someone’s lawn mower, property damage coverage would help pay for the lawn mower. Property damage also covers damage to your own property if a customer makes a claim against your business.
Personal Injury
If a customer is injured on your business’s premises or by one of your products and sues you, general liability would cover the cost of their medical bills and property damage.
Legal Defense
This coverage would help pay for lawyers to defend your business against a lawsuit. This also includes the administrative costs and court costs, which can build up quickly. Legal defense costs are often the most expensive part of a liability claim.
Limitations and Exclusions of General Liability Insurance Policies
General liability policies are designed to be broad policies that provide broad coverage against the most common risks small companies face. However, they also have several limitations and exclusions to help insurers keep the costs of the policies low.
For businesses that need additional coverage, a specialty policy could be a better fit than a general liability policy.
Yearly Claim Limits
If you make seven different claims during the year, you may be forced to prove that all of those claims are valid. If you make too many claims in one year, the insurer may consider you a high-risk customer and either increase your premiums or drop you from the policy altogether.
Liability/Coverage Caps
Each general liability policy has a specific amount of coverage for each type of risk. If your business faces significant losses for one type of risk, you may need to purchase additional insurance coverage through a separate policy.
Exclusions for Specific Types of Risks
While general liability covers many risks, it does not cover every type of risk that a company may face. A common example of an exclusion is a bodily injury caused by products. If your company manufactures a product that injures someone, general liability will not cover the cost of the medical expenses or the lawsuit settlement.
When Should Small Businesses Get General Liability Insurance?
Every company should have a general liability insurance policy in place at all times. This includes small businesses, and it should be the first policy that you have in place. This one policy will be the basis for the rest of the coverage that you need. All of your other plans will add to its coverage and help fill in some of the gaps that are there.
Business owners should not wait to get general liability insurance. The sooner that you can have a policy in place, the less likely your business is to be exposed to a potential lawsuit that could undo all of your hard work. Start with a general liability insurance plan and then add other options on top of it to build a more robust coverage system.
There is a General Liability Insurance Plan That Is Right for Every Business
Business owners should carefully consider how much risk they are willing to take on by not purchasing general liability insurance. While the cost of general liability policies may seem expensive, they are a small price to pay for the protection they provide. If your business faces a significant risk of being sued, general liability insurance could help you avoid financial ruin.
Millers Insurance Group provides a variety of cannabis insurance options. Please reach out to us or fill out our online form to get an insurance quote today for your company’s insurance needs.
