General liability insurance is an essential policy that every business should have. Insurance companies design general liability insurance to take care of those third-party claims that allege that you are responsible for someone’s injuries or property damage. One of the most common examples is when someone slips and falls on your property. If they get hurt, you are liable for the medical bills. This is why people refer to it as “slip and fall coverage.” In these cases, general liability insurance provides coverage.
General liability insurance does not cover every loss, which is why small business owners need to look at other types of insurance to cover the gaps. Generally speaking, general liability insurance doesn’t cover auto accidents that happen while working, employee injuries or illnesses, damage to your business property, mistakes in professional services, or illegal acts by your employees. Let’s look at some specifics to see what isn’t covered and what you need to do to get the right coverage for incidents not covered by your general liability policy.
Problems When Installing Something
Many contractors have to install professional items like an HVAC unit, electrical box, or plumbing fixtures. If the unit itself is damaged while being installed, this is not covered by general liability insurance. For example, if an HVAC contractor is installing a new air conditioner and the air conditioner gets damaged in the installation, the contractor is likely liable for the damages. Even though they are liable for the damages, their general liability insurance will not cover those damages. The contractor will have to work with the client to find a resolution to this problem.
Damage to Customer’s Vehicles
Some businesses take customers’ cars to either work on them or store them. Common examples are a mechanic’s shop or a valet service. If the mechanic is doing a test drive of a customer’s vehicle and is involved in an accident, general liability insurance won’t cover the losses. The mechanic would need to have garage keeper’s liability insurance. The same is true if someone steals the vehicle from the mechanic’s care.
General Liability Doesn’t Cover Drunken Accidents
Many businesses serve alcohol to customers. A major liability for the establishment is that the customer may become drunk and drive home. On their way home, they may become involved in an accident causing damage and possible injuries. In these cases, the restaurant that served the alcohol is liable for damages. However, general liability insurance does not cover this even though there is property damage or injuries. A restaurant or bar needs to have liquor liability insurance to properly protect itself from this type of loss.
General Liability Doesn’t Cover Transporting Tools and Equipment
Some professions move tools around frequently. Contractors, electricians, and installation experts all need to have tools to do their job at a location other than their headquarters. While business property that is at the business’s headquarters gets coverage by commercial property insurance, when transporting property from one location to another, there is no coverage. General liability insurance doesn’t cover this either because general liability insurance covers third-party losses where this is a first-party loss. In order for insurance to cover the claim, the business owner would need to have inland marine insurance to cover the loss.
Dry Cleaners and General Liability Insurance
A dry cleaners business may have general liability insurance to protect them from certain third-party losses. Imagine that a customer steps on an exposed pin. The customer’s injury leads to infection and a claim. General liability insurance covers a loss such as this. However, if something happens to the clothes while at the dry cleaners, what covers that? After all, it is a third-party loss. For example, assume there is a fire at the dry cleaners. The fire burns and destroys the customers’ clothing. General liability insurance doesn’t cover this loss. The dry cleaners would need to have “care, custody, and control coverage” to cover these losses.
What Does General Liability Insurance Cover?
A general liability insurance policy is an important policy to get and is often the first policy business owners buy. The reason is that it covers major third-party losses. General liability insurance covers losses to a person (customer or bystander) where they experience either bodily injury, property damage, or personal injury due to your business operations. Personal injury involves things like libel and slander.
Do You Need General Liability Insurance?
Because general liability insurance doesn’t cover so many instances of losses, one might wonder why general liability is often the starting insurance policy for many business owners. You need general liability insurance if you lease a building because it pays for losses to property rented to you. It also protects you from some expensive types of claims that can happen to anyone.
Take the average slip-and-fall accident. Injury claims attorneys say that the average slip-and-fall accident will settle for between $10,000 and $50,000. That’s an average with some cases yielding much higher settlements. Most small business owners don’t have that type of money to pay out on their own. Doing so would financially burden the business and potentially lead to closure.
Other types of claims that general liability covers include libel and slander, and copyright infringement cases. An average copyright infringement settlement might be $30,000 per infringement. General liability insurance covers this loss so that the business doesn’t have the burden with the financial loss.
How to Shop for the Right Insurance
There is no question that business owners need insurance, but what type of insurance is necessary can often be confusing. This is why you need a trusted insurance agent on your side to help you decipher what types of losses you need to protect against and how to best go about doing that. Most businesses will need more than one type of insurance policy to be properly protected. In some cases, like workers’ compensation, you need to comply with state laws requiring that businesses with employees maintain a policy.
A good insurance agent will take the time to understand your business and its risks. This means that they will ask a lot of questions about what you do and how you operate. If you take customers’ property in, for instance like a cell phone repair shop, you need a specific policy to cover losses to the customers’ property. In that case, you’d need custody, care, and control coverage and your insurance agent should know and recommend this. If you’re a contractor and moving from job site to job site, the agent will likely recommend an inland marine policy to cover your tools and equipment while you move them about.
The bottom line is that without the right type of coverage, you could be at a very serious loss that could financially bankrupt you. Starting with general liability insurance and moving to other policies based on risk will help you protect yourself from devastating losses. It isn’t uncommon for a business to have a general liability policy, a workers’ compensation policy, and a commercial property policy. Other businesses may also have an inland marine policy or some other specialty policy to cover a known risk to the business. It’s about balancing out the risk and the budget for insurance. You want to get the coverage you need, but you don’t want to be overpaying for insurance.