How Does Commercial General Liability Insurance Work?

Knowing where to start with insurance when starting a business is not an easy feat, but working with an insurance broker can help. At a glance, every small business should have one of the following: property insurance, liability insurance, commercial auto insurance, or workers compensation. Let’s take a closer look at Commercial General Liability Insurance and what it covers.

What is commercial general liability insurance?

The overarching purpose of commercial general liability insurance is to protect your business from lawsuits related to injuries or property damage. These may be injuries linked to a product or service that your business offers, damage to the client’s property, or advertising injury. Building your business reputation is vital to gaining the trust of your clients, but instances of libel, slander, defamation or copyright infringements are more common as your business expands. 

Commercial general liability insurance extends to cover damages when your business is found liable in court, in reaching policy limits, and any attorney or legal fees that arise. In the case of an injury claim, the medical bills of the plaintiff are covered if they were injured due to your products or on your property. Other coverages include:

  • Insurer fees from investigating or defending claims
  • Court costs or assessed costs
  • Loss of income from days in court
  • Settlement or judgment fees
  • Interest payments for defense
  • Lawyer and witness fees
  • Purchase of police reports

There are few things to keep in mind about the limitations of your coverage. Commercial general liability insurance does not extend to protect against any illegal acts performed by a business or employee. Additionally, if a claim is higher than the liability plan limit, your coverage will not cover the entire cost. In the case of a mistake or error, general liability coverage does not apply, but professional liability does.

What is the difference between professional and general liability insurance?

Professional and general liability insurance are differentiated based on the type of damage that is incurred. General liability insurance policies are triggered by injury or property damage to a third party. If damages or injuries occur to your own property or to your employees, they are not covered. Rather, commercial property and auto insurance or workers compensation would protect you against these claims. Alternatively, professional liability insurance covers any financial loss without the presence of injuries or property damage.

What do I risk without commercial general liability insurance?

Being prepared for the worst case scenario can be costly at the start, but you are thinking ahead for future problems. Without commercial general liability coverage, legal fees and court costs can easily add up to thousands of dollars regardless of whether the lawsuit is dropped or proceeds. Understanding the degree of risk also applies to how your business operates. Some industries have more risk associated with injuries, such as contracting and construction, compared to others. If you own the business property, there are higher costs to you as the employer in the case of property damage. If you lease the property, the owners may require you to take out insurance prior to using the facilities in accordance with the lease agreement. Conducting business on a client’s property can also mean more is at stake in the case of an accident or poor workmanship.

How much does commercial general liability insurance cost?

On average, commercial general liability insurance in Canada costs $500 per month for small businesses and is determined from an estimate of what you are likely to pay each year. Popular coverage plans for small businesses have a $1 to $2 million coverage limit, but larger businesses may require higher plans depending on the size of the company and the number of employees or assets. 

We can help you stay one step ahead to find the right insurance plan to help with your peace of mind and protect your business.