Shielding Your Business: An Essential Guide to General Liability Insurance

Achieving success for your company involves navigating risks. Protect your business and its assets effectively by investing in quality liability insurance.

In the fast-paced and competitive modern economy, unforeseen challenges can spring up at any moment. From interacting with clients to conducting normal daily operations, companies today face many potential liabilities that could result in significant financial losses or legal challenges.

While no one can totally avoid every hazard, certain steps can be taken beforehand to mitigate the impact of any slip-ups. After all, staying ahead of the game requires securing adequate insurance coverage that will help shield your business – before the mistakes happen.

What is general liability insurance?

General liability insurance is a type of coverage that's designed to protect businesses from a variety of third-party claims, including property damage and bodily and personal injuries. Covered events could be situations that occur during operations, interactions with customers, or due to defective products or services. For example, if a customer claims to have been hurt in your place of business, they may file a lawsuit or claim for damages. In this case, general liability insurance can serve as a financial safety net – assisting you with legal and other associated costs – without breaking the company bank.

Like other types of insurance, these types of plans do not cover everything. Certain exclusions may apply, such as intentional acts, auto accidents, professional errors, or claims related to employee injuries (which may be covered under workers' compensation policies).

How does it work?

"General liability insurance is a front air bag for your business," says Whitney Solvay, licensed agent at Automatic Data Processing Insurance Agency, Inc. (ADPIA^®) and vice president of ADP^®.

"You hope you're never in a situation where it's needed, but you're glad it's there 'just in case.'"

The workings of general liability insurance are pretty straightforward. Claims fall into three primary categories: bodily injury, property damage, and personal or advertising injury. Bodily injury claims arise from physical harm caused to a third-party (i.e., when a customer slips and falls in your store). Property damage generally covers someone else's property, like the accidental breaking of a client's equipment during a service call. The last category involves non-physical injuries, such as defamation claims or copyright infringement.

If an incident occurs, you'll need to notify your insurance provider promptly. At that point, they will investigate the claim and determine appropriate coverage. If your business faces a covered claim, the insurance company may take care of the costs of legal defense, including attorney and/or court fees, and any settlements or judgments up to policy limits.

Investing in insurance is a major business decision. ... You must weigh all of the factors and make the best decision for you.

Whitney Solvay, ADPIA®

4 key benefits of general liability insurance

"The landscape of the business insurance market points to a greater need for general liability insurance as protection," adds Solvay. "After all, no matter how careful you or your employees are, accidents are still going to happen."

According to a recent industry report, U.S. businesses are experiencing more liability-incident lawsuits, as well as higher medical costs stemming from third-party injuries. The good news? General liability insurance is still quite affordable for most businesses. The latest statistics show that a typical small business should expect to pay just under $50 per month for their policy.

Taking this into account, here are the top reasons you might want to consider purchasing this type of insurance:

1. It defends against a wide variety of mishaps.

Situations like a major accident in your workplace or a lawsuit arising from a product defect can be problematic. Without this coverage, your business could be on the hook for stiff financial penalties and legal expenses. With the right plan, you'll be defended properly against bodily harm, property damage, and intellectual property claims, and have the assets to cover repairs and/or replacement costs.

2. It protects your bottom line without breaking it.

Without general liability insurance, you're completely liable for all costs associated with both credible and frivolous claims and lawsuits. By investing in insurance and paying a reasonable premium, you'll be saving yourself tremendous cost should a major event take place.

3. It enhances your business reputation.

While not necessarily legally required, many client or partner agreements, particularly government contracts, require proof of general liability insurance. By having this coverage, you won't just satisfy your contractual obligations – you'll also add to your company's credibility and professionalism in the eyes of stakeholders.

4. It enables you to focus on growth.

Running a business involves inherent risks; however, by having general liability insurance, you'll acquire one more vital asset: peace of mind. According to a recent report, half of small business owners surveyed said making a professional mistake was one of their biggest worries. Without having to be constantly concerned about the potential fallout of unforeseen accidents or lawsuits, you'll be free to focus on keeping your employees happy and growing your business.

Is general liability insurance right for your business?

"Investing in insurance is a major business decision," argues Solvay. "At the end of the day, you must weigh all of the factors and make the best decision for you."

When considering general liability insurance, ask yourself the following questions:

What potential liabilities exist within my business?
What are my business assets worth?
How does the cost of purchasing general liability insurance compare to the potential losses from a major claim or incident?

"All business owners know that errors are going to happen," concludes Solvay. "What separates the best ones from the rest of the pack is that smart business owners invest in protection – and general liability insurance is a very valuable investment."

To learn more about protecting your employees and your business with insurance, check out ADP^® affiliate, Automatic Data Processing Insurance Agency, Inc. (ADPIA^®), for the latest in general liability insurance.

_{Automatic Data Processing Insurance Agency, Inc. (ADPIA) is an affiliate of ADP, Inc. All insurance products will be offered and sold only through ADPIA, its licensed agents or its licensed insurance partners; One ADP Blvd. Roseland, NJ 07068. CA license #0D04044. Licensed in 50 states. Certain services may not be available in all states with all carriers. Some carriers may charge an additional fee for services. This information is not intended as tax or legal advice. If you have any questions, contact a tax or legal professional. ADP, the ADP logo and ADPIA are registered trademarks of ADP, Inc. Copyright © 2024 ADP, Inc. All rights reserved.}