General liability insurance for small business owners provides broad protection against claims by persons who are injured or whose property is damaged as a consequence of the insured’s business operations. It is a way to manage the risk of being sued due to the insured’s actions or failures to act, or allegations of such, that result in bodily injury or property damage to customers and others. When the insured acts, or fails to act, in such a way that causes injury or damage to another, the insured incurs liability, or legal responsibility, for the injury or damage.
In exchange for a relatively small amount of money known as the premium, the policyholder receives protection that is two-fold. First, the insured receives a legal defense against lawsuits which can be very expensive. Second, if liability is established the insurer will pay damages up to the limit of liability which can be $1 million or higher. This protection is vital because the assets of the business are at risk, even if the business owner is ultimately successful in defending the lawsuit.
Business owners can purchase liability coverage through a stand-alone policy like a Commercial General Liability Policy or through a package policy like a Business Owners Insurance Policy that includes liability protection and coverage for loss or damage to the building and its contents.
Injury or damage to another, for which the small business owner needs protection against, can occur in the following ways:
Injury or damage as the result of conditions on the premises and ongoing operations that are conducted away from the premises.
Injury or damage that occurs after the operations are completed, known as completed operations, for example, building contractors.
Injury or damage as the result of the insured’s product, for example, a manufacturer or a retailer of the product. This is known as product liability.
The insurance industry distinguishes coverage for premises and operations from products and completed operations. Products and completed operations coverage is treated as a single category because the injury or damages occurs away from the premises and results from either an operation that has been completed or a product that has been sold.
The protection afforded to the small business owner also extends to his or her employees while they are in the course of their employment.
If the insured is a professional, for example a physician or attorney, he or she will also need professional liability insurance for protection against claims and suits alleging malpractice. Professional liability insurance can be purchased as a stand-alone policy or in combination with Commercial General Liability Insurance.