If you’re a small business owner, we’re going to make an educated guess that you spend a lot of time with Google. We have nothing against online search as a way to find information – in fact, it’s probably how you found this article. But we know that trying to do it all yourself, especially if you’re a newer business owner, can be exhausting.
That’s what this comprehensive guide is for. It’s your all-in-one stop for everything about small business liability insurance. Let’s explore what it is, cost, how to shop for a policy, and more.
Reader’s Note: “General liability insurance” will be used interchangeably with “small business liability insurance in this piece.
General liability insurance is a foundational coverage for most business owners. It covers costs associated with medical expenses and property damage. It also covers costs related to accusations of libel or slander and copyright infringement. These costs can include judgments, settlements, and legal fees.
It’s important to note that general liability only covers third-party damages. So, if you had medical expenses due to an accident at work, your general liability would not cover this expense. You would need another type of insurance, workers' compensation insurance, to cover personal injury.
Similarly, it doesn’t cover cases where someone else promotes libel about you. General liability insurance only covers defense fees if someone accuses you of defamation.
It can be challenging to imagine how a general liability policy could be helpful to you, a small business owner. So, let’s look at some potential scenarios where small business liability insurance could save you from unwanted downtime and costly expenses.
Amanda owns a local hardware store called Nuts & Bolts Hardware.
One day, a customer comes in to buy new flooring. Amanda just mopped the entire floor, and even though she put out “Caution! Wet Floor” signs, the customer slips and falls. The customer injures their head and sues Amanda, holding her liable for their medical expenses.
Amanda relies on subcontractors for installations in the community. One day, her team is installing new flooring in a customer’s kitchen when the ceiling falls in. Despite her team’s claims they didn’t do anything to cause it, the customer sues Amanda for the cost of the repairs.
Amanda wanted to be prepared for a worst-case scenario when she opened Nuts & Bolts, and she has a general liability insurance policy. This policy covers her customer’s medical expenses and the property damage for her other customer, settling both suits out of court. The care with which Amanda handles the situations upholds her reputation in the community, allowing her business to continue thriving with little lost income and minimal downtime.
Most small business owners are worried about one thing above the rest when it comes to liability insurance – the cost. We’re going to give you tips on comparing quotes and balancing your coverage priorities with what you can afford. However, we recommend that you start to look at insurance as an investment in the future of your business – not an expense. If you can’t afford insurance, you can’t afford an incident.
The current average cost of liability insurance is $542 per year. The key word here is average. Every business has several factors that affect the initial quote you’ll see.
For labor-based businesses, like plumbers, contractors, and lawn care specialists, those factors are:
For office-based businesses, those factors are:
Both lists are ordered from most to least important for the type of business. Insurance companies typically consider your risk exposure to increase as your gross revenue increases.
They also consider each person you employ or subcontract as a potential liability for your business. The risk involved in your work is the primary cost driver for labor-based companies. Some risks could be operating heavy machinery, working high up, or cutting large branches daily.
A few other factors affect your potential cost, no matter your business type. You can expect a higher quote if you have a history of claims or have lapsed in coverage.
We recommend getting multiple quotes when searching for small business liability insurance. Here are our recommendations for how to compare your quotes for the best price.
Lastly, understand what goes into your small business liability insurance quote. Considering your business’s risk exposure and insurance history can give you important context for why you’re getting quotes within a specific range.
One of the most common questions from small business owners is how they can find affordable insurance options. While we believe that insurance is an investment in the future of your business - and there isn’t room for cutting corners - we also understand that every dollar you spend as a small business owner counts.
Our biggest tip for insurance shopping on a budget is to know your coverage priorities. You may not be able to get the most comprehensive insurance policy if you’re shopping with a limited budget, but you also may not need it to ensure that your highest-risk areas are covered.
Sit down with a trusted CoverHound insurance expert who understands your industry and make a list of likely incidents. If you’re a labor-based business and often operate on others’ property, property damage is probably relatively high on your list of potential concerns.
If you’re an office-based business that writes advertorials, advertising injury and copyright infringement might be more of a coverage priority for you.
Know what you must have in your policy going into shopping and what you’re okay excluding, and you should be able to find coverage that works for your business and what you can spend.
While we’re on the subject of shopping on a budget, let’s talk about liability insurance red flags.
One of the biggest ones is a quote that is simply too good to be true. If it sounds too good, it probably is. The coverage may be sparse at best or may use vague or overly specific language to avoid covering you in most incidents.
Language is another red flag to look out for. Language that’s too vague or too specific can give your carrier a lot of loopholes when it comes to providing you with good coverage in the case of an incident. Have a trusted insurance broker review your policy to see if they spot any language that conveniently leaves coverage loopholes.
Another is easy add-ons. Many carriers offer add-on policies to general liability, like cyber insurance or commercial auto. However, if those add-on policies are priced cheaply, they probably aren’t doing anything for you.
Pro Tip: Check your policy for specific exclusions. Some exclusions are standard, like terrorism and infectious disease. However, additional coverage that you wanted could be excluded from your policy. Don’t forget to ask what’s included and what’s excluded!
A: Yes. No small business owner wants to imagine being sued, but the right liability insurance ensures you’re protected—so you can focus on growing your dream.
A: For legal purposes, you don’t need liability insurance. However, you’ll find it difficult to rent a business property or be hired by clients as a contractor without insurance. Investing in the right liability insurance can bring you peace of mind and long-term protection.
A: Common general liability claims include accident claims, like a slip and fall, customer injury lawsuits, product liability lawsuits, and property damage lawsuits. If you make or sell products, you can get product liability insurance as an add-on in the case of product liability lawsuits or customer injury lawsuits due to a product.
A: Yes, general liability is often bundled with business property insurance in a business owner’s policy (BOP).
A: Yes! CoverHound offers our customers an easy-to-use online platform where you can compare quotes from over a dozen A-rated carriers. Buy insurance and start coverage in 24 hours with our all-in-one platform.
Small business liability insurance can protect your business from unexpected costs due to accidents, lawsuits, and associated fees. No company is too small for an incident, and if you don’t have insurance, the cost of an incident may not be survivable for a small business.
That’s where CoverHound comes in. While you focus on growing your business, we’ll handle finding the right coverage to give you peace of mind. In just minutes, compare quotes from top carriers and secure the best policy for your business—no guesswork required.
Our team of licensed experts has helped thousands of small business owners find policies tailored to their needs, all without the hassle. Start your customized quote today.
Insurance shopping simplified
Insurance shopping simplified
