General Liability Insurance: Understanding What Is and Isn’t Covered


General liability insurance is an essential component of any business insurance policy. It provides protection against a wide range of risks and can help businesses manage financial risk and protect their assets. However, many business owners do not fully understand what is and isn’t covered under their general liability insurance policy. In this article, we will break down the key aspects of general liability insurance and help you understand its coverage limitations.

What is General Liability Insurance?

General liability insurance is a type of business insurance that provides coverage for third-party claims of bodily injury, property damage, and personal and advertising injury. It is designed to protect your business in the event that your business activities cause harm or damage to others.

The coverage typically includes legal defense costs, settlements, judgments, and medical expenses. It can also provide coverage for claims of libel and slander, copyright infringement, and false advertising. It is important to note that general liability insurance provides coverage for third-party claims only, meaning it does not cover damages to your own property or injuries to yourself or your employees.

What is Covered by General Liability Insurance?

1. Bodily Injury and Medical Expenses

If a third party, such as a customer or visitor, is injured as a result of your business activities, general liability insurance can cover their medical expenses. For example, if a customer slips and falls in your store and sustains injuries, the policy can cover their medical bills. It can also cover the cost of legal fees if the injured party sues your business.

2. Property Damage

General liability insurance can also cover damages to third-party property caused by your business operations. For instance, if your company accidentally damages a client’s property while working on their premises, the policy can cover the costs of repairing or replacing the damaged property.

3. Personal and Advertising Injury

This coverage protects your business against claims of libel, slander, false advertising, and copyright infringement. If your business is sued for causing harm to a third party’s reputation or using copyrighted material without permission, your general liability policy can cover the legal defense costs and any damages awarded.

4. Products Liability

If your business manufactures, distributes, or sells products, there is a risk of those products causing harm or injury to a customer. Products liability coverage under general liability insurance can protect your business against claims of bodily injury or property damage caused by your product.

What is Not Covered by General Liability Insurance?

1. Employee Injuries or Illnesses

General liability insurance does not cover injuries or illnesses sustained by your employees while on the job. For that, you would need to have worker’s compensation insurance, which is a separate type of insurance.

2. Professional Mistakes or Negligence

If your business provides professional services, such as legal or medical services, general liability insurance will not cover claims related to errors or omissions in your work. For this, you would need to have professional liability insurance.

3. Intentional Acts

Intentional acts are not covered under general liability insurance policies. For instance, if a customer alleges that you or your employee intentionally caused them harm, the policy will not cover the claim.

4. Property Damage to Your Own Business

General liability insurance provides coverage for third-party property damage only. If your business property, equipment, or inventory gets damaged, you would need to have property insurance to cover the cost of repairs or replacement.

5. Cyber Attacks

General liability insurance does not cover damages caused by cyber attacks, such as data breaches or cyber theft. For this, you would need to consider cyber liability insurance.

Understanding what is and isn’t covered by general liability insurance is crucial for businesses. It is essential to carefully review your policy and know its limitations to avoid any unpleasant surprises when you file a claim.

How Much Coverage Do You Need?

The amount of coverage you need will depend on the size and nature of your business. It is essential to have enough coverage to protect your assets and handle any potential claims that arise. However, having too much coverage can mean paying higher premiums, which can hurt your bottom line. Working with a trusted insurance agent can help you determine the appropriate level of coverage for your business.

Final Thoughts

Having general liability insurance as part of your business insurance policy is vital. It can protect your business from financial loss due to third-party claims, giving you peace of mind and allowing you to focus on growing your business. However, it is essential to understand what is and isn’t covered by your policy to ensure you have the right coverage for your business’s specific needs.