When is General Liability Insurance Required?

Although state and federal governments do not require general liability insurance, you may still be required to carry this insurance to work in certain industries or obtain certain licenses. You should understand the ins and outs of your industry, as well as specific requirements for contracts. For example, you may need general liability insurance when signing contracts with companies or clients, leasing office space and/or applying for a professional license.

How Much General Liability Insurance Do You Need?  
Knowing how much insurance coverage to have depends on the reason you need it and different aspects of your business.

Many general liability insurance policies may range from $1 million, $2 million to $5 million a year for claims, but these may change depending on your business. Be sure to speak with your insurance agent about calculating the risks your business may face when it comes to general liability claims so that you can get the right amount of protection. Having too little liability insurance can leave your business paying for the remaining expenses. Even a single lawsuit without proper coverage can leave your business in heavy financial turmoil.

Consider the industry you work in, the number of employees you have and where your business is located. The larger your business, the more risk you face of a lawsuit both due to possibly having more than one location and having an expansive clientele. The more customers you provide a service or product to, the more liability risks you may face.

What Does General Liability Insurance Cover?  
General liability insurance covers basic accidents and claims concerning:

This insurance covers lawsuit expenses the business may face after an accident such as court fees, defense costs and legal expenses.

What Does General Liability Insurance Not Cover?  

Unfortunately, general liability insurance will not cover everything. There are certain accidents and lawsuits that are excluded from general liability insurance and must be covered under separate types of insurance. There are also other requirements when it comes to separate liability coverages.

It will not cover claims regarding:

There are types of liability insurance coverages that are required by state law or for businesses to operate within certain industries.

Liability Coverages Required  
Commercial Auto Liability Insurance
Commercial auto insurance is designed to cover vehicles owned or used by a business for work purposes. Auto insurance requirements vary by state, but any vehicle on the road must carry a certain amount of liability insurance. In Florida, all vehicles must carry at least:

• $10,000 in bodily injury liability per person  

• $20,000 in bodily injury liability per accident  

• $10,000 in property damage liability  

Workers Compensation
Workers compensation works to cover employees that are injured on the job. It may cover expenses such as medical bills, disability benefits, vocational benefits and more. The requirement for workers compensation also varies from state to state depending on your industry and how many employees you have.

Professional Liability Insurance  
Professional liability insurance covers professional negligence where general liability insurance doesn’t. If your business provides a specialized or professional service, you may need this insurance for accidents that cause a client to lose money. Depending on your industry, this insurance may be required in order to operate or obtain certain licenses. This insurance is known by different names, as well, such as Errors and Omissions insurance or medical malpractice insurance.

Liquor Liability Insurance  
Liquor liability insurance is another coverage required to obtain certain licenses. If you wish to obtain a license to sell or manufacture alcohol, you will need liquor liability insurance. This insurance covers bodily injury and property damage someone may cause after drinking or purchasing alcohol from your business.

There are many types of liability insurance policies that you can add to a package policy tailored for your business. While they may not be required, it is important to have the right amount of insurance to protect your business’ assets. Umbrella liability insurance, for example, is not required but serves to fill in the gaps left by your other liability insurance policies.

Ask an insurance agent about bundling general liability insurance with other important coverages. You can even bundle general liability with commercial property insurance in a business owners policy to protect your business’ assets.