As part of our overarching look at all things business insurance, we are diving into commercial general liability insurance to help you understand what it is, what it isn’t and how you should approach it as a business owner.
What is commercial general liability insurance?
Commercial general liability insurance provides coverage against claims of bodily injury, property damage, personal injury and advertising injury. It is designed to protect businesses from financial losses due to third-party claims, including medical products and services, product liability, property damage, libel, slander and other business exposures. Commercial general liability is often shortened to CGL.
Do I need commercial general liability insurance?
Yes, it is highly recommended that businesses invest in commercial general liability insurance. CGL provides coverage against claims of bodily injury, property damage, personal injury and advertising injury caused by accidents. It helps to protect your business from financial losses due to third-party claims and other business exposures.
A simple example of when CGL insurance would cover financial loss is if you visit a customer and accidentally injure them, your insurance would protect you from any bodily injury claims. Similarly, if you damage a customer’s property, CGL would cover you against claims for third-party damage.
How much does commercial general liability insurance cost?
Commercial general liability insurance costs vary depending on the type and amount of coverage needed for a business. Generally speaking, premiums can range between $400 to several thousand per year.
This cost is impacted by a variety of factors, including, but not limited to:
- Type of business
- Amount of experience
- Annual revenue
- Any previous insurance claims
- Number of employees
Additionally, most policies also require a deductible payment to receive coverage in case of a claim. You agree to cover a certain amount of any claim yourself.
What does commercial general liability insurance cover?
Commercial general liability insurance, or CGL, provides coverage against claims of third-party bodily injury, property damage, personal injury and advertising injury caused by accidents.
Third-Party Bodily Injury Liability
A CGL insurance policy can help cover your business from any legal costs or damages awarded due to a third party getting injured on or off your property due to the actions of your business.
For example, a customer visiting your store or office could slip and fall while entering. In this case, they could sue your business for any injury caused. Potentially claiming for medical bills, their pain and also any lost revenue or wages.
It’s important to note that even if you’re not responsible for an injury or accident, you can still be brought to court, which can have costly legal expenses. Something that, as a small business owner, you would likely want to avoid paying.
Property Damage Liability
In the case of property damage liability, a CGL policy will cover your business if found legally liable for any damage to a third party’s property.
A typical claim scenario occurs with repair companies. Their business operations generally require interacting with a customer’s home or belongings. If a customer claims their property was damaged while in your care, you could face a liability claim for third-party property damage. In this scenario, your general liability insurance coverage could cover legal fees or damages awarded.
Personal and Advertising Injury Liability
This aspect of CGL coverage addresses any defamation, slander, libel, copyright infringement or false advertising liability that your small business is accused of making.
For example, imagine your company releases a new marketing campaign and includes images without the owner’s express permission. In this case, your business could have legal action brought against it for damages and lost income of the original owner.
In the case of defamation, slander and libel, a typical claim example is that of a marketing campaign unfairly or untruthfully claiming their competitor’s product has defects. This could have a negative impact on your competitor, and you could be made to pay for any damages.
This type of coverage is often an extension or additional liability coverage add-on to a general liability policy. Product liability can cover damages caused by a defect or malfunction of products your business manufactures, sells or distributes.
For example, suppose a customer burns their hand while using a new mug your company sold. In that case, product liability coverage could cover legal defense costs or payouts awarded. It’s crucial to note this would cover the third-party liability costs but not the cost of any product recall if that was required.
Tenants Legal Liability
Often included by default in a CGL insurance policy, tenant legal liability covers your business for any property damage caused to a space you are leasing.
A typical claim example is if an employee accidentally causes a fire in your leased office space, your insurance would cover the cost of any damage caused to the property.
What does commercial general liability insurance not cover?
In a nutshell, CGL typically doesn’t cover anything other than what we have mentioned here. Some examples of items not covered are:
- Professional services – this would require professional liability insurance
- Any commercial automobiles – this would require commercial auto insurance
- The legal liability of directors and officers – this would require director’s and officer’s liability insurance
- Any contractors and subcontractors are often excluded from a CGL
- Pollution caused by your company
- Product recalls
- Cyber or data breaches – this would require cyber insurance
- Any harassment or discrimination claims – this would require employment practices liability insurance.
- Damage to your businesses property – this would require commercial property insurance
This might seem like a long (and expensive) list of items not covered by CGL, but it’s important to note that your business activities might mean you don’t require coverage for these risks. It’s important to talk to your broker to understand your business needs regarding insurance coverage.
Often the case with running a business, small business insurance can be complex. Still, in summary, CGL or Commercial General Liability coverage is an essential type of insurance for most small businesses. Covering you from a variety of injury or property damage claims for a small monthly amount.
As always, speaking to a licensed insurance broker is key to understanding how to adequately protect your business.
Does commercial general liability insurance cover automobile liability?
No, your company would require a separate commercial auto insurance policy to cover automobile liability.
Does commercial general liability insurance cover property damage?
Yes and no, it covers damages caused to a third-parties property but does not cover damages caused to your business property.