What is general liability insurance? What does it cover? Do you even need it? General liability insurance is often overlooked by small business owners in particular. Because the world of business insurance can be complicated and overwhelming, it is easy to brush it off and think that you don’t need cover. After all, who wants to spend precious business hours reading up about the finer details of insurance?
But imagine that you’ve applied a pest treatment, only to get a phone call complaining that you’ve accidentally damaged a customer’s property by over-run of chemical and now they want the rooms repainted. You’re potentially exposed to considerable financial loss because of the damage and the customer wanting you to cover the damages. This is when general liability insurance would come in. We’re here to help demystify general liability insurance, so that you can decide if you need it for your business.
What is general liability insurance?
General liability insurance is designed to protect you and your business from “general” claims. These could relate to damage to property or bodily injuries. The insurance itself can help to cover legal fees as well as medical expenses resulting from claims for which you or your business might be legally responsible.
Essentially, this type of insurances gives you financial protection against the possibility of being found liable to a third party for death, injury, damage or loss of property or financial loss due to, or related to, work performed by you or your employees. This could be your customer or another member of the public.
Every business could benefit from general liability insurance, even if you’re a small business and think that you could get away without being covered. Don’t risk it. General liability claims can run into the hundreds of thousands of dollars.
What does it cover?
General liability insurance policies typically cover you and your company for claims involving bodily injuries and property damage resulting from your products, services or operations.
General liability insurance doesn’t cover employee injuries, auto accidents, punitive damages (in most states), workmanship, intentional acts or professional mistakes. That is what car insurance and professional indemnity insurance are for.
Do I really need general liability insurance?
Even if you consider yours a tiny business, you should do your research into general liability insurance before you brush it off. Chances are, you may have a need for it one day.
If there are customers or suppliers visiting your premises, you should consider cover. The opposite applies too. If you or your employees visit the premises of customers, suppliers, or partners then general liability insurance could give you protection should someone take legal action against you for damage you cause while there.
Don’t ever be fooled into thinking general liability insurance is an unnecessary expense. You could be left significantly out of pocket. For a relatively low cost per month, general liability insurance can give you financial protection against a variety of claims. Which means peace of mind.
Consider the alternative. Do you have a spare $10,000 to cover the costs of damage to a customer’s artificial turf accidentally caused by your cleaning hoses? Or, what will the impact be on your business if you need to shell out nearly $90,000 for accidental damage from your forklifts at your customer’s warehouse?
Even the Australian government agrees. It notes that although general liability insurance is not compulsory, it is strongly recommended. That said, there are some fields or occupations in which you cannot conduct business until you are covered. These requirements vary by state and territory. You should check with your local authorities to understand what cover is mandatory.
What kind of claims would be covered?
If your small business has a suitable general liability insurance policy, then claims of a wide variety can be covered.
For example, some of the types of claim costs that you may be covered for would include:
- Damage to someone else’s property
- Injury to a member of the public, supplier, or other person who’s not a member of your staff or otherwise employed by you
- Damage to the equipment or personal belongings of someone not employed by you.
- Damage to someone’s property or person as a result of unintended spray drift from an on-site treatment or due to an incident at your own warehouse
- Clean up costs or cost for bodily injury associated with pollution as a result of environmental impairment after a fumigation or cleaning operation
How much cover do I need and what does general liability insurance cost?
The size of your business, the risk you’re exposed to, etc, will help you determine how much cover you need. Think about all the different business activities you conduct on a day-to-day basis. Then consider how much risk is attached to each.
For instance, basic handyman services are generally considered less risky than termite management or pre purchase inspections. Also keep in mind that sometimes, customers will require a minimum amount of coverage to be in place. That is, before they will agree to take up your services.
Contact future customers to ask about this. Then you can ensure you have enough cover to meet their needs.
Choosing a cover amount always depends on your individual circumstances. And the size of cover taken out will of course impact the premium that you pay. On top of the amount of cover you choose to insure for, previous claims history and other factors will all come into play in order to calculate your risk factor. And therefore, the cost of your premiums.
Your best bet is to get a quote and consider the value of peace of mind versus the expected premium.
Rapid Solutions combines both public and products liability insurance for property services businesses into the one policy type. This gives you better cover with less hassle. Find out more here.