General Liability Insurance

Quotes from Top Carriers in 15 Minutes
General Liability Insurance can help cover the cost of third-party lawsuits over slip-and-fall injuries, slander, property damage, and more.

What Is General Liability Insurance?

 

If business insurance were Thanksgiving dinner, Commercial General Liability Insurance would be the turkey. It's the starting point and centerpiece of any business's commercial insurance plan.

As the video explains, Commercial General Liability Insurance is usually the first policy small-business owners purchase because they often need it to sign commerical leases and client contracts.

General Liability Insurance can help pay for lawsuits over:

  1. Third-party injuries.
  2. Third-party property damage.
  3. Product liability.
  4. Advertising injuries.

It's tempting to think you'll never get sued, but lawsuits are part of the business landscape. And when a small business is sued, the costs can be devastating. A 2005 study [PDF] by the Small Business Administration found that a lawsuit costs between $3,000 and $150,000 for a small business. In today's dollars, that's closer to $4,000 to $190,000.

Put simply, General Liability Insurance is an essential safety net when you don't have deep pockets. Let's take a look at a few examples of the lawsuits this policy can cover.

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Small business lawsuits cost between $3,000 and $150,000.

4 Ways General Liability Insurance Protects Your Business
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Third-Party Bodily Injury

(e.g., slip-and-falls)

If a customer is hurt on your property, General Liability Insurance can help pay for their immediate medical expenses or your legal expenses when they sue.

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Third-Party Property Damage

(e.g., ruined customer smartphones)

If you damage customer property, General Liability Insurance can help pay to repair or replace it.

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Product Liability

(e.g., hot coffee burns)

If your product hurts someone or damages their property, General Liability Insurance can help pay for your legal expenses.

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Advertising Injury

(e.g., slander & copyright infringement)

If someone sues you over slander or copyright infringement, General Liability Insurance can help pay for lawsuit expenses.

Coverage for Third-Party Injuries

(e.g., slip-and-falls)
Man slips and falls over banana peel in front of store

third-party injuries (n.): physical bodily harm that happens to people not employed by your business

Customer slip-and-fall accidents cost about $20,000 on average, according to a report by The Hartford. What's worse: these accidents can happen to any visitor at any businesss.

Third-Party Injury Example: In the video above, a customer slips on a banana peel and breaks his leg. The doctor's bills and time off work add up fast, so the customer sues to recoup his losses.

Look around your business. See some tracked-in rainwater? Boxes or books near walkways? Computer cords? Under the right (or wrong) circumstances, these things can be the hazards that trigger an expensive lawsuit.

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Third-Party Injury Protection May Cover...

  • Non-employee injuries that happen on your property.
  • Immediate medical expenses for the injured person.
  • Legal costs when you're sued over the incident.

Commerical General Liablity Insurance in Action: Your policy can cover the cost of your customer's immediate medical expenses, such as the ambulance ride and emergency room visit. Insurance companies offer immediate medical expense coverage because it's often cheaper to pay a little money up front rather than a lot of money in a lawsuit down the road.

But if the customer refuses your assistance and opts to sue instead, you have a second line of defense. Your policy can help cover the cost of hiring a lawyer to negotiate and settle the case (or take it to trial).

To summarize: for third-party injuries, General Liability Insurance can cover…

  • Immediate medical expenses.
  • Lawyers' fees.
  • Court expenses.
  • Settlements.
  • Judgments, if the case goes to trial and you're found liable for wrongdoing.

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Slip-and-fall accidents typically cost small businesses ~$20k.

Coverage for Third-Party Property Damage

(e.g., ruined customer smartphones)
Man drops smartphone into coffeepot

third-party property damage (n): a catchall phrase for client, customer, or vendor property lost or damaged on your premises

If you damage someone's property, you may have to pay to repair or replace it. In some cases, you don't even have to touch something to be responsible for its damage.

Third-Party Property Damage Example: In the video, a customer slips and sends his smartphone flying into a vat of hot soup. His phone wouldn't be swimming with the veggies if he hadn't slipped, and he wouldn’t have slipped if the banana peel had been removed. So he wants the storeowner, who should have removed the banana peel, to pay for the damages.

Some other examples? You might accidentally spill your coffee on a client's laptop. That's a cool $3,000 down the drain.

Or maybe your office building's fire spreads to a neighboring business. Imagine paying to repair an entire building when your business is already reeling from the disaster.

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Third-Party Property Damage Protection May Cover…

  • Repair costs for damaged property.
  • Replacements for lost or destroyed property.

Commercial General Liability Insurance in Action: General Liability Insurance can't keep accidents from happening. However, it can help cushion the blow by paying to repair or replace someone's property you lost or damaged.

 

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Handling someone's property? If it gets damaged, expect to pay for repairs.

Coverage for Product Liability

(e.g., hot coffee burns)
Man gets sick from packaged food

product liability (n): the legal responsibility to pay for damage caused by a faulty product

Not all property damage or customer injuries happen in your store. If you manufacture, distribute, or sell products, you can be sued over the harm those products cause.

You read that right. Most states allow injured parties to sue any business that helped put a defective or dangerous product into consumer hands.

Product Liability Example: In the video, a customer buys and eats the store’s signature salsa. Shortly after, he falls seriously ill. He thinks the salsa is to blame, so he sues the business to help pay for medical expenses.

But say you sell piping hot coffee that burns a customer or hoverboards that send riders crashing to the sidewalk. You didn’t grow the beans or manufacture the boards, but because you benefitted from the sale, you could be on the hook for damages.

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Product Liability Protection May Cover…

  • Damage caused by the products you make, distribute, or sell.
  • Legal costs when you're sued over the incident.

Commercial General Liability Insurance in Action: Your policy can typically cover the legal expenses associated with product liability lawsuits. That's good news for any manufacturer, distributor, supplier, or retailer. Most states have strict liability laws, and that means you can take every reasonable precaution to make the product safe and still be held liable for the harm it causes.

Your General Liability policy can help pay for legal expenses when you're sued over a product's…

  • Design defects: inherently dangerous products like scalding coffee, lawn darts, or hoverboards.
  • Manufacturing defects: products made with contaminated ingredients, defective parts, or misassembled parts.
  • Marketing defects: products without proper warnings, instructions, or labels.

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You could be liable for damage a product causes, even if it wasn't your fault.

Coverage for Advertising Injuries

(e.g., slander and copyright infringement)
Celebrity used in advertising, lawsuit results

advertising injury (n): libel, slander, copyright infringement, and other harm your marketing or advertising causes to someone's reputation, brand, or market share

Libel and slander lawsuits cost $50,000 on average, according to The Hartford. And it's easier than ever to be accused of slander, libel, or copyright infringement if you advertise online or use social media.

A single tweet or photo on your website could trigger a lawsuit.

Advertising Injury Example: In the video, a celebrity eats the business’s salsa. The business sees opportunity and plasters the celebrity's image on the label. The problem? The business didn’t have permission. The celebrity sues to take a cut of what the business earned by linking itself with his image.

Here’s another example: you tweet about a client who’s late on payments. That client hasn't noticed her pile of unpaid invoices, but the tweet gets her attention. She claims it hurt her reputation and sues you for libel.

Have a website? Be careful with the photos you post and logos you use. Either could be a copyright or trademark infringement lawsuit in the making, so make sure you own the rights.

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Advertising Injury Protection May Cover...

  • Invasion of privacy, such as using someone's image or words without their consent.
  • Libel or slander.
  • Copyright or trademark infringement.
  • Legal costs when you're sued over these incidents.

Free eBook Download

Download the free eBookTweet or Twibel: The Small-Business Owner's Guide to Advertising Injury for an in-depth look at how to prevent the kind of advertising mistakes that can land your business in legal trouble.

Download Now

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Libel and slander lawsuits typically cost small businesses ~$50,000.

What Does General Liability Insurance Cover?

Commerical General Liability Insurance in Action: Your policy's advertising injury coverage can help pay for legal defense as well as settlement or judgment costs when you're sued over advertising mistakes. That way a misstep doesn't force you to close shop.

General Liability Insurance may cover...

  • Third-party injury lawsuits (including slip-and-fall).

  • Third-party damage lawsuits.

  • Product liability lawsuits.

  • Libel, slander, and copyright infringement lawsuits.

General Liability Insurance does not cover...

  • Professional errors.

  • Employee injuries.

  • Damage to your business property.

  • Employee discrimination lawsuits.

  • Fraud.

How Much Does Small Business Insurance Cost?

$425

Median yearly cost

$576

Average yearly cost

$400

Average yearly cost for low-risk business

Small-business General Liability Insurance is typically very affordable. If you run a low-risk business, you may pay less than $400 a year. On average, policies cost $576 per year, but the median cost is $425, meaning that most businesses' policies fall on the cheaper end of the spectrum.

To put that in perspective, your policy may cost between $33 and $50 per month. That's about what you'd spend on a family outing to the movies.

These price estimates are for policies with a $1 million / $2 million limit. That means you get up to $1 million in coverage for any single claim and up to $2 million in coverage for all claims in a year.

To learn more about the cost of General Liability Insurance, see our business insurance cost analysis.

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80% of small businesses pay less than $50 a month for General Liability Insurance.

When Do You Need General Liability Insurance?

 
Home Business
Freelancer
Small Business
Liability Protection Homeowner's insurance usually doesn't cover lawsuits against your business. You may require GL to pay for bodily injury and property damage lawsuits. You're working at a client's business and may require protection in case you damage their equipment. You sign a commercial lease and your landlord requires GL.
Stakeholder Requirements A client contract requires you to have a GL policy. A project manager requires you to have GL insurance. You land your first major contract and it requires you to have a GL policy.
Advertising Injury Protection You launch a website and want protection for slander, libel, and accidental copyright infringement. You want protection in case contractors and project managers accuse you of slandering their business. You launch your first advertising campaign and want protection for advertising injury lawsuits.
Home Business
Liability Protection
Homeowner's insurance usually doesn't cover lawsuits against your business. You may require GL to pay for bodily injury and property damage lawsuits.
Stakeholder Requirements
A client contract requires you to have a GL policy.
Advertising Injury Protection
You launch a website and want protection for slander, libel, and accidental copyright infringement.
Freelancer
Liability Protection
You're working at a client's business and need protection in case you damage their equipment.
Stakeholder Requirements
A project manager requires you to have GL insurance.
Advertising Injury Protection
You want protection in case contractors and project managers accuse you of slandering their business.
Small Business
Liability Protection
You sign a commercial lease and your landlord requires GL.
Stakeholder Requirements
You land your first major contract and it requires you to have GL.
Advertising Injury Protection
You launch your first advertising campaign and want protection for advertising injury lawsuits.

General Liability Insurance: Further Reading

General Liability in the Insureon Blog