Don’t you hate it when you look up a word like general liability insurance in the dictionary, and the definition leaves you more confused than you were before? Sometimes that’s the way insurance definitions can sound. They use words you don’t know to define a word you don’t know. We can do better than that.

Here’s an explanation of Commercial General Liability Insurance that any small-business owner can understand:

  • GL Insurance (also called Commercial General Liability Insurance) is an insurance policy that pays for a small business’s legal expenses when they are sued by non-employees.
  • Lawsuits covered by GL Insurance usually include property damage, bodily injury, slip-and-fall accidents, slander, libel, copyright infringement, product liability and more.
  • GL Insurance does NOT cover lawsuits alleging professional negligence.  Those are covered by Errors and Omissions Insurance.

Here’s an example of Commercial General Liability Insurance in action. A landscaper puts down his hedge trimmer to run to his truck. It’s a hot day and he has forgotten his water bottle on the front seat. After grabbing the bottle, he hears a scream and runs back to see his client’s child had played with the trimmers and dropped the blade on his foot, severing a toe in the process. The parents file a lawsuit for $150,000. General Liability Insurance pays for the landscaper’s lawyers in addition to the six-figure damages he owes the family.

How Does General Liability Insurance Help Small Businesses?

General Liability Insurance can help small businesses…general liability insurance

  • Sign contracts with new clients
  • Afford the cost of a lawsuit
  • Avoid bankruptcy
  • Acquire professional licenses
  • Rent a professional office space

How does it do all these things?  It offers financial security because you’ll know that one lawsuit won’t take down your business.

General Liability Insurance is also important simply because clients, local governments and landlords might require you to have it. In order to get an electrician’s license, a contractor might have to meet state requirements for Commercial General Liability Insurance.

To learn more, see an  article on General Liability Insurance Requirements.