What Is General Liability Insurance?

Photo Courtesy: Drazen/stock.adobe.com

In the United States, there are around 33.2 million small businesses. During 2020, 76.2% of them experienced an event that could have qualified for an insurance claim, suggesting they had the proper coverage. General liability insurance – also referred to as business liability insurance – is one such type of coverage. Here’s a closer look at what general liability insurance is, which businesses may need it, and what it does and doesn’t cover. 

Who Is It For?

General liability insurance is a kind of business insurance that provides companies with some financial protection against claims by third parties – such as customers – relating to bodily harm, personal injury, and property damage. Additionally, it can assist with attorney fees owed when defending against such claims.

Typically, general liability insurance is recommended for any small business owner, regardless of whether they produce products or offer services. The concept of harm can extend beyond the physical. For example, reputational damage to another is considered harm in this case. Similarly, copyright infringement claims can also qualify as harm in regard to this type of coverage.

What Does This Type of Policy Cover?

With general liability insurance, the coverage provides some financial protection for several types of events or claims made by third parties. The policy usually covers bodily harm to a customer, such as an injury acquired while on a company’s property. With the coverage, the insurer assists with handling costs related to any required medical treatment, alleviating the burden the small business would otherwise shoulder.

In some cases, the bodily harm coverage also extends to cover injuries that occurred when a customer was using a company’s products. However, some insurers require separate product liability coverage for those events, so it’s critical to review the policy details carefully to determine whether this coverage is included in a general liability policy.

Similarly, damage caused to a third party’s property is covered by a general liability insurance policy. For example, if employees installed a product on a customer’s site and damaged any of the customer’s property during the process, any damage claims relating to that property are potentially addressable with the general liability policy.

In situations where a third party claims reputational harm – which typically emerges as claims of slander or libel – that’s also handled by the coverage. The policy helps pay for any attorney services needed to defend the small business and any resulting settlements or judgments. Advertising injury – such as copyright infringement claims – are also usually included in the policy, functioning similarly to the coverage for slander and libel.

What Claims Are Typically Excluded From Coverage?

General liability insurance is only usable in addressing harm caused to third parties. As a result, it won’t handle work-related injuries sustained by employees. Similarly, damage to a company’s property isn’t addressable with a general liability policy.

Finally, mistakes made while providing professional services that would usually get covered by professional liability insurance aren’t usually covered by general liability insurance. That mainly includes claims involving misrepresentation or negligence. In some cases, claims involving slander or libel are addressed by professional liability insurance as well, though that’s still commonly a part of general liability insurance, too.