High-risk businesses need liability insurance. You can try arguing that, but you won’t win. The chance of injury and damage at, say, a trampoline facility, is clearly extreme. Arborists climbing trees with chainsaws, limbing trees over buildings, using chippers, also have a high exposure to bodily injury and property damage. But traditionally high-risk businesses are not the only ones who need liability coverage.
Do you make and sell jewelry? Get paid to walk your friends and neighbours’ dogs? Run a small catering business on the side? Increasingly, people are supplementing their income with small, home-based businesses, and just like large corporations and small non-profits, these side hustles require liability insurance too.
What is it?
Commercial General Liability (CGL) policies provide coverage for claims of bodily injury and property damage arising out of your business pursuits.
The damage may be a result of your:
- Premises – a box of merchandise is left in a walkway and a customer trips over it and fractures their femur.
- Tenants’ Legal Liability – an employee accidentally leaves something in the lunchroom’s microwave oven, causing a fire, which damages the building you rent or lease.
- Operations – while walking a client’s dog, the dog bites as a passerby.
- Products – a child chokes on the small toy you sold his parents.
- Completed Operations – a contractor installs a cabinet, which then falls off the wall and damages the client’s kitchen counters.
- Advertising – an advertising campaign includes unintentional copyright infringement.
CGLs provide you with coverage for settlements, as well as defense costs for legal expenses incurred if a lawsuit is brought against your business, and medical expenses coverage if someone is injured by your products, or on your business’ premises.
Negligence, which may arise from the actions or failures to act, of you and your employees, is covered by a CGL.
Who needs it?
Everyone operating a business, no matter how big or small, needs a CGL policy to protect their assets.
How much coverage do I need?
Most CGLs provide between $1,000,000 and $5,000,000 in coverage.
The limit of insurance your business needs depends on several things:
- The level of risk associated with your business operations. If they involve children or animals (and definitely if they involve both), your business’ risk may be higher.
- The level of risk associated with the product you make. I’m looking at you, dynamite manufacturers.
- The requirements of your landlord, municipality, or other authorities. For instance, if your business operates out of a shopping mall, the mall may have minimum liability requirements.
- The area(s) in which your business operates. Some regions tend to award higher damages than others.
Is there anything else?
A CGL does not provide coverage for business property (merchandise, equipment), business interruption (lost income following a claim), errors and omissions (if you provide advice to your clients as part of your services, this is important), nor for automobile use, among other things.
The scope of your business operations will determine what other coverages you should package with your CGL to ensure you are covered for your unique exposures. Thoroughly discussing your business with your broker will help them find the proper coverages for you.
-Morgan Thomas, BA
Administration Coordinator and Personal Insurance Trainer