Guide to General Liability Insurance for Small Business Owners — Backoffice (2022)

When Henry Walker went to get a watermelon at Walmart, he didn’t expect to be disabled. But that’s what happened: his foot got caught in the pallet as he reached for the watermelon, and he fell so hard that he broke his hip. When the case went to court, they found video evidence that Walker was not the first person entangled in the pallet, and the court awarded him $7.5 million in damages.

But Walmart won’t have to pay the settlement out of pocket. On the other hand, it is more likely that general liability insurance will cover the cost. And even if your business isn’t likely to get a large settlement, even a medium-sized lawsuit can be devastating to a small business owner.

What is general liability insurance?

General liability insurance is a type of business insurance that protects you in the case of general third-party claims against your business, including bodily injury and property damage. It is also sometimes called business liability insurance or commercial general liability insurance.

What does general liability insurance cover?

Despite the fact that it has a “general” name, general liability insurance provides liability coverage for claims related to a few specific things: a customer is injured at your place of business, you or an employee damages the customer’s property, reputational damage you cause to others, and personal injury. advertising such as copyright infringement.

How does general liability insurance work?

General liability insurance provides third party coverage, which means payment goes to the third party involved in the claim, not to you directly. You are considered the “first party,” and the “third party” is the person who has been injured—either physically, financially, or reputationally.

Some examples of claims that will be covered by general liability insurance include:

• Third party bodily injury. A customer slips and falls in your store. Their injuries force them to go to the hospital and they sue your business for medical cost coverage. Your insurance will cover legal fees and medical expenses related to the incident.
• Third party property damage. Your employee misjudged the length of the ladder and punched a hole in the customer’s wall. All sheets of sheetrock need to be replaced. Your general liability insurance can help cover the cost of repairs.
• Reputation damage. Competitors lie about you to get potential customers. Everything they said was a complete fabrication, but word spread. You know and your insurance will help you recover damages.
• Advertising injury. You created a billboard and used another company’s logo without permission. That’s copyright infringement, so they sue you. Your insurance will help cover legal defense costs as well as the settlement itself.

General liability insurance coverage does not cover:

• Worker injuries. Workers’ compensation insurance is required for any employee injuries and lost wages.
• Damage caused by your negligence. While an electrical fire in your restaurant will be covered, a fire caused by leaving a burner next to a pot of oil will not be covered. Any damage your insurance company can prove is due to your or your employee’s negligence is not covered by general liability insurance.
• Damage to your business property. If someone throws a rock through the front window of your store, you need commercial property insurance for this type of coverage.
• Damage to your personal property. No business insurance provides coverage for damage to your personal property.
• Illegal act. If you or one of your employees does something illegal that leads to a lawsuit or damages, your insurance won’t cover it.
• Business-related vehicle accidents. If your delivery van, food truck, or other specialty vehicle is involved in an accident, you need commercial auto insurance for coverage.

General liability insurance FAQs

What does general liability insurance usually cover?

General liability insurance typically covers claims related to customers being injured at your place of business, employees damaging customer property, reputational damage and advertising injuries such as copyright infringement.

What is the difference between professional liability and general liability insurance?

General liability insurance covers claims related to physical risks such as bodily injury and third party property damage. Professional liability insurance covers intangible risks such as damages for errors and omissions, which is when your client suffers financial loss because of bad advice or other mistakes you make.

Is general liability based on results?

No, general liability is not based on results. Instead, it is based primarily on how risky your business is. Other factors that may affect the cost of general liability include the number of employees you have, where you are located, the age of your company and previous insurance claims.

source: https://www.shopify.co.id/blog/general-liability-insurance