When Is a Business Required to Have General Liability Insurance?

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As a small-businesses owner, you might have three questions about General Liability Insurance requirements:

  • What do insurance companies require when I apply for insurance?
  • When am I required to have General Liability Insurance?
  • Which coverage do I need in my GL Insurance policy?

Answering these questions is a good way to understand how General Liability Insurance works and what you need to know before purchasing a policy.

What's Required of a Business That Applies for General Liability Insurance?

From an insurance company's perspective, a small business first needs to show that it isn't a risky investment. Insurance companies look at your past history of insurance claims and the type of work you do. If they find any red flags that suggest your business is an extraordinary risk, they won't offer to cover you.

For instance, insurers might not cover a juggler who specializes in throwing five chainsaws in the air while ice skating. It's true. Insurance companies won't exactly be lining up to cover that guy.

But usually, an insurance company will have no problems with the kind of work your business does. As long as you don't work in high-risk industries and don't have a history of being sued, insurance companies are likely to insure your business.

When Do Small Businesses Need General Liability Insurance Coverage?

Most small businesses get General Liability Insurance coverage shortly after they are founded, because they could need it in a variety of situations, including…

  • Applying for a professional license (e.g., a plumber's license).
  • Signing contracts with larger companies.
  • Signing an office lease.

Clients and companies often require this insurance because it offers them reassurances about your business. Because GL Insurance covers many common lawsuits, clients know that your business's finances are relatively secure. It means you won't have to file bankruptcy if you're sued. Clients want to know that you'll be able to deliver the work you're contracted for and that a lawsuit (or other covered event) won't prevent you from finishing the job.

General Liability Insurance also reassures your clients that you'll be able to compensate them if you damage their property or injure someone with your work.

To learn more about how General Liability Insurance protects businesses, see our article of General Liability Insurance examples.

What Coverage Do I Need in My General Liability Insurance Policy?

Good insurance companies make sure the insurance policy they write for you appropriately matches your business's needs. General Liability Insurance policies are not "one size fits all."; Each one should be customized.

For example, if you run a restaurant in a Seattle, you'll want to make sure that you have plenty of slip-and-fall coverage to cover any injuries that occur at your store during the long rainy season. If you manufacture niche children's toys, you'll want to have product liability coverage to cover the cost of any lawsuits if children hurt themselves with your toys.

A good insurance broker prepares a sample insurance quote to fit the specific needs of your business and walks you through your options, helping you find the right fit.

To learn more about General Liability Insurance or to receive free insurance quotes, contact one of Insureon's agents today.

General Liability Insurance: Further Reading

General liability insurance in the Insureon blog