What is general liability insurance?
You’ve bought general liability insurance for your business, but you’re not entirely sure what it does for you. You know that it protects your business, and shows that you are trustworthy and responsible, but you’re still a little confused about what exactly is covered.
There are a few different types of business insurance, each of which covers something a little different. For example, if you’ve bought professional liability insurance, you’ll be covered in case a client accuses you of making a professional mistake or failing to deliver on promised services.
Equipment insurance covers your tools and equipment; auto insurance protects your car or van in case you get into an accident or the vehicle is stolen or damaged; and commercial property insurance covers damage to your office premises.
Then there’s general liability insurance. This is the most basic type of business insurance. In most states, you won’t be able to get a business license without it. However, this can be the most confusing type of insurance, and often, is the least understood. Although every general liability insurance policy is different, most general liability policies do cover more or less the same things. Here is our clear guide to help you understand what general liability insurance covers for your business.
The three things covered by general liability insurance
1. Bodily injury
If someone is accidentally injured or hurt in a way that is connected to your business, you could be required to pay their medical costs. These costs could get pretty high. For example, you’re unloading your tools from your work van and a passerby doesn’t see your toolbox and trips over it damaging their back. You could be held liable to pay for the cost of the injured person’s MRIs, x-rays, hospital fees, ongoing physical therapy, and more.
Thankfully, general liability insurance covers these situations.
Your general liability insurance protects you even if the accident is clearly not your fault. For example, if a client comes to your office to talk about a project, trips on their way in and breaks their wrist, they could sue you for the cost of medical expenses.
Or, if you’re a plumber working on a clogged sink at a customer’s home and someone sprains their ankle on the wet floor, general liability insurance would cover all these situations.
2. Property damage
This is the most common issue covered by general liability insurance. Property damage coverage pays out if anyone’s property is damaged through your work. Here are some examples:
- You scrape someone’s car when they park outside your office
- You break a client’s garden ornament when you’re cutting the grass
- You’re a personal trainer working with a client in her own home, and you knock over and smash their favorite vase while demonstrating a lunge
- You’re talking with a client about their home renovation plans when you spill your coffee over their very expensive rug, ruining it entirely
General liability insurance also covers your business, even if you weren’t personally involved in the incident. For example, if you send your assistant to a client’s home to drop off new tiles for their bathroom, but on the way the assistant bumps into a full-length mirror and shatters it. The client could sue your business for the damage, and general liability insurance would cover you.
Accidents can happen very easily, but they can run very expensive. Paying for a new paint job on someone’s car or a replacement heirloom ornament could cost you a lot of money. It might even break your business. That’s why you need general liability insurance.
3. Personal injury
General liability insurance covers both physical injury and personal injury, but it’s important to understand the difference between them. As we explained above, physical injury involves damage to a person’s body, like a broken leg or a sprained wrist. Personal injury means non-physical damage to someone, like harming their reputation or their income.
- For example, if you use a photo of your client’s beautifully landscaped garden as part of your advertising, but your client feels that you’ve invaded their privacy by sharing it. They could sue you for personal injury.
- You share an Instagram picture of a celebrity personal trainer to draw some attention to your feed, but they think you’re claiming that they taught you some of your skills and sues you for making a false claim.
- You tell a fellow-electrician a funny story about a difficult client, which they then tell to someone else. Eventually, your client hears about it, and sues you for harming their reputation.
- The image that you use on your flyers for your daycare center is very similar to one that your competitor uses on their flyers. Your competitor sues you for stealing their marketing images.
- In your pilates class you help a client to get into the right position, but they feel you touched them inappropriately and sue you for harassment
These are all cases of personal injury, and your general liability insurance covers them all.
What general liability insurance doesn’t cover
It’s just as important to know what isn’t covered by your general liability insurance. This includes:
- Any personal injury to you or your employee through your work. For that, you need Worker’s Compensation insurance.
- If your equipment, tools, or machinery, including computers, work tools, or office furniture is damaged or stolen.
- If you make a professional mistake, such as using the wrong fuse and causing all the lights to blow, or a client accuses you of negligence or malpractice.
- Any kind of damage to your business van or car, including if it gets stolen.
- Damage caused by a product that you sell or make. You need product liability insurance for this.
Does your business need more insurance, like professional liability insurance, commercial property insurance, or auto insurance? When you know exactly what your general liability insurance policy covers, you can answer this question with confidence, and know exactly the coverage of policies you have, and what coverage you may need to add.
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