As a small business owner, the last thing you want is to cause damage to someone’s property, or even worse, harm a customer. But the unfortunate reality is that accidents can sometimes happen which may be grounds for a lawsuit. It's your responsibility to protect your business and yourself should this occur. \r\n\r\nThat's exactly what general liability insurance is for: protecting you and your business from legal liability in many situations, so you can conduct your business with peace of mind.\r\nWhat is commercial general liability insurance? \r\nWhile there are many different types of insurance you can purchase for your small business, commercial general liability is one of the most common types of insurance obtained by new businesses.\r\n\r\nThat's because, as the name suggests, it provides broad general liability coverage for situations in which you or your business are found liable for property damage or injuries caused by your product or service. \r\nWhat is commercial general liability insurance used for?\r\nSituations can arise that provide third parties with grounds to sue you. Commercial general liability insurance can usually cover four kinds of claims:\r\n\r\n \tBodily injury – If someone sustains an injury at your business location, or as a result of using your product or service, and your business is sued, commercial general liability insurance can be used. An incident can be as simple as someone tripping and falling at your location. \r\n \tProperty damage – If a third party's property is damaged by your product or service, and your business is sued, this insurance can be used. For example, a house painting business may accidentally damage an item in a client's home.\r\n \tPersonal and Advertising Injury – If slander or libel claims are made against your business, commercial general liability insurance can be used.\r\n \tMedical expenses – If someone incurs medical expenses due to an injury at your location or due to your business operations, this insurance can be used. While they sound similar, the difference between bodily injury coverage and medical expenses coverage is that the latter is “no-fault”. This means it can be used even if your business is not legally liable for an injury. An example of when it might be used is when a business and a claimant want to quickly resolve an issue without taking it to court.\r\n\r\nWhile these are the types of claims usually covered by commercial general liability insurance, every policy is different. Check the specifics of the policy offered by your insurer to be aware of your coverage. \r\nLegal requirements for small businesses \r\nIn Canada, commercial general liability insurance is not mandatory by law. However, just because it isn't obligatory, doesn't mean it isn't a smart business choice. As the examples above demonstrate, situations that can potentially lead to a lawsuit can take place even if you take every precaution. \r\n\r\nThe only type of insurance that is mandated by law for businesses is commercial auto insurance. \r\nWhat is the difference between general liability and business insurance?\r\nBusiness insurance is a catch-all term that encompasses many different kinds of insurance you can purchase for your business. The combination of policies you might consider for your business will depend on the specifics of your business operations, however, all would fall under the umbrella of business insurance policies.\r\n\r\nGeneral liability insurance is a specific type of business insurance covering expenses associated with liability claims of bodily injury, property damage, personal and advertising injury, and medical expenses.\r\nBenefits of commercial general liability coverage\r\nGeneral liability insurance can protect you in the event of a claim against your business that might otherwise force you to shut down. Most small businesses don't necessarily have the cash on hand to cover legal fees, medical bills, and other costs that can arise in the event that they're found liable. \r\n\r\nCommercial general liability insurance provides peace of mind and the assurance that such an event won't cost you much out-of-pocket.\r\n\r\nNote that if your business is a sole proprietorship, you can be personally liable for claims against your business since your business is not a distinct legal entity. That means that legal expenses incurred by the business are yours to cover, making general liability insurance particularly attractive as it can protect your personal assets.\r\nWhat general liability insurance covers \r\nCommercial general liability insurance generally covers the following costs associated with any type of claim covered by the policy:\r\n\r\n \tLegal costs incurred to defend yourself against the claim being made\r\n \tDamages compensated to the third party making the claim\r\n \tCosts covering property damage claims\r\n \tCourt costs and other legal fees\r\n \tAdministrative costs you incur in the process of handling claims against you\r\n\r\nYou may still have to pay a deductible in the event of a claim against your business, but this will be considerably less than the full costs you might have otherwise incurred. Insurance contracts often also contain coverage limits, so make sure you are aware of the terms and conditions before getting insured.\r\nWhen should small businesses get liability insurance? \r\nWhile it's a good idea for every business to obtain general liability insurance as soon as operations start, some businesses are more prone to liability than others and thus, face a higher risk of a lawsuit. \r\n\r\nConsider where you work. If you operate a physical location, you're at higher risk for claims of injuries on your premises than a home-based business due to the higher volume of traffic, making general liability insurance more essential.. \r\n\r\nWhat type of product do you sell? While flower pots aren’t likely to cause injury, an electric saw might. If you sell a product that has the potential to cause injury to a customer, you should seriously consider general liability insurance.\r\n\r\nFor most businesses, the cost of purchasing a general liability insurance policy outweighs the risks of operating without one.\r\nHow much does commercial general liability cost? \r\nWhile small- to medium-sized businesses can anticipate rates starting at about $450 per year, rates can vary greatly from one business to the next. \r\nFactors affecting the cost of insurance for small business \r\nSome of the factors that are taken into account by insurance companies when calculating insurance quotes include: \r\n\r\n \tHow long you've been in business\r\n \tThe number of employees you have\r\n \tWhether you operate physical locations\r\n \tYour annual revenues\r\n \tPrevious insurance claims you've made\r\n \tThe type of goods and services you provide\r\n\r\nKey takeaways \r\nCommercial general liability insurance is often the first type of insurance small businesses purchase for good reason. It provides protection in the event of unexpected lawsuits that, while unlikely, can have serious financial implications. \r\n\r\nGeneral liability insurance is considered relatively inexpensive compared to other kinds of coverage, making it a smart choice for any small business operating in Canada, despite the fact that it isn't legally obligatory to have it. \r\nCommercial general liability insurance for small business FAQs\r\n1. Does your small business need general liability insurance by law?\r\nYour business does not legally need general liability insurance, but it will come in handy in the event of claims against your business covering personal injury, medical expenses, property claims, and personal and advertising claims. \r\n2. What is not covered under commercial general liability insurance? \r\nThere are many types of claims that aren't covered by general liability insurance. These include:\r\n\r\n \tWorker's compensation\r\n \tEmployer liability for employee injuries\r\n \tDamage to your business property\r\n \tDamage to your products\r\n \tDamage to the work you do, such as jobs your business completes\r\n \tExpected or intended damage\r\n\r\nAs you can see, there are many types of claims that aren't covered by general liability insurance. Your insurance agent can help you identify which additional policies may be required specific to your business. \r\n3. What is the difference between general liability and professional liability?\r\nWhile general liability insurance is more focused on physical and bodily harm, professional liability insurance covers claims associated with financial losses experienced by a customer as a result of the inaccurate or incomplete professional advice provided to them. For example, if a client experiences financial loss due to your professional services and has grounds for a lawsuit, this claim would be covered by professional liability insurance.