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Commercial general liability insurance: the basics.

Mistakes and unforeseen events happen, which is why we purchase insurance for our homes, our cars, and even on our own lives.

Businesses are no different. Your dry cleaner wants to provide the best service possible but sometimes items are lost or stolen. A cafe owner serves artisanal baked goods, but a customer contracts food poisoning from a muffin. This is where commercial general liability insurance comes in.

In the simplest of terms, commercial general liability insurance protects you and your business against claims for bodily or personal injuries and advertising liability. It also covers you if a third party sues your business for damages incurred at your business or by your products.

Having commercial general liability insurance can help cover the costs of defending yourself against lawsuits for any of the above-mentioned claims.

The following sections go over some of the most common questions about commercial general liability, including which businesses should invest in this kind of coverage, how much its costs, where to get great rates, and the other types of insurance businesses should consider buying.

Your questions about commercial general liability insurance, answered.

What kind of businesses need commercial general liability insurance?

There is no real distinction as to which kinds of businesses should have or need insurance. Everyone needs it, even if your business is home-based.

Even a small lawsuit or challenge in court can run up huge costs for any size business, and the financial risk of not having insurance is far greater than the up-front costs. Both your bottom line and reputation can be hurt with your clients and customers.

Businesses are exposed to a lot of risks so having commercial general liability insurance makes financial and reputational sense for any business.

What does commercial general liability insurance cover?

A commercial general liability policy will help business owners reduce and manage the losses they may incur if they are sued for injuries or damages by third parties (whether they occur on or off of your property).

Falls and slips, for example, are one of the number one causes of hospitalized injuries, and businesses need to make sure they are covered for such emergencies.

Other bodily injuries that commercial general liability might cover include pain and suffering, lost wages, and medical bills.

Also, property damage liability is a big part of coverage that every business needs to consider when getting commercial general liability coverage. The coverage will help mitigate costs in the event a third party experiences damage or loss due to your business (the incident can happen either on or off your property).

How much commercial general liability insurance do I need?

When deciding how much coverage to buy, you should consider the risks your business may face. Every company is different. The right amount of coverage for your unique situation will differ from another business’s needs.

As for who can help you figure out how much insurance to buy, look for an insurance broker or agent who not only specializes in commercial insurance but who also understands your industry.

Budget plays a large role in the decision-making process, too. Do you want a standard policy versus something more premium? It all depends on how much you can spend, what you want to protect and who you select as your service provider.

What affects the cost of commercial general liability insurance?

Again, there is no one-size-fits-all approach to commercial general liability insurance. If you are a home-based business, for example, there is likely no need for extra commercial general liability insurance related to property damage, as your home insurance will likely cover such scenarios (though you should always check with your insurance company).

However, if that home business is related to e-commerce or some kind of digital enterprise, you may want to consider data breach coverage, for example.

On the other hand, a large plowing company that comes in contact with peoples’ property every day (cars, homes, driveways, for example) would need extra commercial general liability coverage to ensure their drivers and vehicles are covered given the higher risk for damages to occur.

In Canada, some businesses like contractors are required to carry coverage and the type of business they operate may change the costs they pay should they decide on $2-million, $3-million or more in coverage.

As a business owner, you need to also consider how much your business is worth, the inventory you hold, your property values, and more. These factors will also affect your costs depending on how you rate their value.

How do I get a great rate for commercial general liability insurance?

Businesses of all sizes (but especially smaller ones) will want to find the best rates for their commercial general liability coverage. It’s best to do your homework and shop around for the best rates for comparable coverage.

Besides doing your due diligence, you can also take steps to reduce risks at your workplace. This includes things like installing security cameras and ensuring your business meets all safety and occupational hazard safeguards.

Commercial insurance providers usually provide discounts for companies that take steps to improve safety.

What other insurance coverage should business owners consider?

Commercial general liability insurance coverage is important, but there are certainly other types of insurance coverage to consider. Here are some examples:

Business interruption insurance: Insures you if your business is halted by weather or other related problems.

Commercial property insurance: This policy is designed to cover the physical assets of a business against loss or damages.

Errors and omissions: Also called professional liability insurance, this protects businesses from acts of professional negligence.

Combined commercial insurance: This form of commercial insurance policy bundles insurance coverage like property, liability and business interruption.

Directors and officers liability insurance: This provides company executives with a form of professional liability insurance should they fail to report certain records or financial loss.

The decision is yours, depending on the needs of your business. You can consult your insurance broker or agent for more guidance.