A general liability insurance policy protects a business in a wide range of situations. Most of these scenarios involve potential claims or lawsuits involving customers, third parties like delivery and shipping people, or members of the general public. You might wonder whether your operation requires general liability insurance coverage and how much it may need. Examine these four issues to determine if you need coverage and how much might be necessary.
Think of the class of people who are visitors as broadly as possible. If anyone who isn't currently covered by your organization's workers' compensation policy comes in or out of your business at any time, that's a liability risk. It doesn't matter if you run a business that's closed to the public and the only person who steps on the property is the delivery person from UPS. That single individual represents a liability risk because they could slip and fall, cut themselves on an object, or experience some other injury.
Damage to customer property represents another general liability risk. Suppose you run a computer repair business. You perform work on a customer's server, and they experience a catastrophic loss of data that traces to your work.
You can certainly fight it out in court regarding their negligence if they didn't have sufficient backups. Even if you prevail on that argument, you'll likely be on the hook for the damages associated with the loss of the equipment. Likewise, if your work prevented their backup system from doing its job, you might be on the hook for their business losses.
Folks who visit customers' properties incur similar risks. Contractors always risk damaging homes and places of business, for example. If a plumber creates a leak that causes hundreds of thousands of dollars in damages, that could be the end of their business.
When a business advertises, it provides assurances regarding the performance of its products and services. If a customer can prove an advertising claim wasn't fulfilled, they may seek damages. You can never be quite sure how customers will interpret advertising claims. Worse, you can never be sure how a court might see such claims. If you advertise, a general liability insurance policy is a wise choice.
Calculating Coverage Needs
Never carry less coverage than you can afford to pay out of pocket without bankrupting your business. Even if it means carrying a higher premium, get the coverage. Likewise, assume the worst scenario. If someone experiences permanent physical injuries, they may seek millions in damages. Choose your policy accordingly.