What You Should Know About Small Business General Liability Insurance

Updated: Oct 1

By eHealth


(Photo by Getty Images)

As a small business owner, you probably spend time considering what expenses are essential to the well-being of your business, especially when it comes to the different types of insurance you could buy. Small business general liability insurance is not a luxury, according to the U.S. Small Business Administration.


General liability insurance could save your small business from financial ruin in the event of an injury on the business property or damage caused in some way by the company. Keep in mind that not all forms of general liability insurance plans are equal. Therefore, you should learn the basics of general liability insurance for the small business, so you make smart choices.


What is small business general liability insurance?


Small business general liability insurance covers the company against third-party claims for physical damages. A familiar illustration of general liability insurance is an insurer’s payment of medical bills related to a customer’s fall on the ice in the business’ parking lot.


But small business general liability insurance often provides coverage beyond an incident involving a customer’s injury on business property.  It may cover costs associated with civil court actions or awards, such as:

  • Legal fees

  • Settlements agreed between the plaintiff and defendant/insurer

  • Compensatory damages (payment amount necessary to replace what was damaged or lost)

  • Non-monetary losses (such as pain and suffering or personal distress)

  • Punitive damages (payment amount in excess of compensatory damages to punish the defendant and deter future behavior that caused the injury)

General liability insurance is not limited to coverage for physical injuries sustained by third-parties (e.g., visitors) at the company’s site. It often provides coverage for damages to the property owned by another. For example, in addition to paying medical expenses, general liability coverage may also pay for the replacement of a smartphone damaged when a customer slipped, fell, and broke his wrist and smartphone on the business’ icy parking lot.  


For small business owners who lease business space, general liability insurance may cover damages to that rental space caused by fire or weather.


It may also cover advertising and copyright infringement claims.  


Although coverage for digital data storage and loss may be covered by some general liability insurers, it is usually added to the coverage at an extra cost.


What’s not covered by small business liability insurance?


Small business general liability insurance works like an umbrella to cover damage incurred by third parties, such as customers, visiting your business, and to protect the business from claims of damages made against the business. The employee who falls off a ladder at work and breaks his leg must file a claim with workers’ compensation because the general liability insurance for small businesses does not usually protect people working for the company, including the owner, from injuries to person or personal property.


While general liability insurance for small businesses may extend to some types of damage to your company’s rented property, it generally will not cover damage done to property owned by your business. General liability insurance does NOT provide coverage for such circumstances as:

  • Employment disputes

  • Damage to company vehicles

  • Medical expenses related to automobile accidents involving you or your employees

  • Professional errors & omissions in performing business services

  • Cyberattacks that disable key business operating systems, destroy electronic data records, or result in potential identity theft.

  • Business interruption caused by natural disaster or government-declared disaster

  • Business interruption caused by employee sickness or injury

Employee absenteeism is likely the most common form of business interruption. To protect your small business, you may want to explore small business group health insurance. In addition to providing health insurance coverage for the well-being of yourself, family, and employees, you may receive some tax benefits for your business. To learn more about small business health insurance options, contact us at The Huttenlocher Group.


Other types of insurance specialize in covering specific issues, such as those mentioned above. We are happy to assist you in learning more about the variety of commercial insurance types for your small business.


What type of enterprise benefits from general liability insurance for small businesses?


The truth is companies of all sizes could benefit from general liability insurance. But for small business owners, general liability insurance is especially important protection against the financial impact of lawsuits settled in favor of the plaintiff (injured party), which could potentially drain the company finances and even the business owner’s personal finances.


How much general liability insurance does a small business need?


How much general liability a small business needs depends on several factors, including budget constraints, the relative risk of claims for physical damages, and other insurance needs of the business. A small business with a relatively high risk for injury claims, such as a gym, or a business in a region known for snow or ice, might opt for more coverage. A company with no public physical space typically carries relatively low risk of injury claims, so its owner could reasonably opt for a modest level of coverage.


Small business general liability insurance is an important type of coverage to have for your small business, but it’s just one in a number of insurance options your company may need. As a prudent business owner, you know you must budget the cost of insurance for the financial well-being of your company. You also know you have to read policy documents to match business needs with actual coverage.  


This article is for general information and may not be updated after publication. Consult your own tax, accounting, or legal advisor instead of relying on this article as tax, accounting, or legal advice.





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General Liability insurance, Waterford, Troy, Farmington Hills, Southfield, Rochester Hills, W Bloomfield, Pontiac, Royal Oak, Novi, Commerce, Orion, Independence, White Lake, Madison Heights, Oak Park, Auburn Hills, Oxford, Birmingham, Ferndale, Highland, Oakland, Michigan

The Huttenlocher Group

1007 W Huron St, Waterford , MI  48328

(248) 681-2100

1007 W Huron St, Waterford Twp, MI 48328

(248) 681-2100

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