Every business needs commercial general liability (CGL) insurance. It’s there to protect you when you might make mistakes that inadvertently cause someone else harm.
Still, many business owners don’t fully understand the ins and outs of a general liability policy. While it is far-reaching, it still has its limitations, and sometimes you might not realize precisely when you will exceed the limits of your coverage. Let’s consider three common misconceptions about this coverage, and why you shouldn’t treat them as fact.
Myth 1: BOPs Offer All the Coverage You Need
Many small business owners get their critical coverage through a business owners policy (BOP). The BOP contains numerous essential commercial insurance benefits in one place, including liability coverage.
However, BOPs only offer general liability insurance as a baseline of coverage. Therefore, to assume that your BOP contains all the liability coverage you need is incorrect. Often, you will need to augment the coverage within a BOP, including by buying a commercial umbrella liability plan. This umbrella policy offers additional benefits that you can claim once a claim exceeds the financial limit of the CGL benefit within the BOP itself.
Myth 2: CGL Benefits Cover All Commercial Liabilities
A CGL policy is not all-encompassing. It generally only covers common liabilities—property damage, bodily injuries, personal injuries, product injuries—that might occur in any business. It does not cover more specific risks like cyber liabilities, directors & officers (D&O) liabilities or industry-specific risks.
Furthermore, neither employee liabilities nor the business’s own property will be covered by this benefit. However, this coverage is available separately and you will need to augment your CGL plan appropriately.
Myth 3: Your Small Business Doesn’t Have Enough Liabilities to Need Coverage
Some small business owners mistakenly think that they don’t have to buy liability coverage because they don’t pose enough of a risk to customers to merit buying coverage. This is categorically incorrect.
The bottom line is that you never know when someone might experience a property loss or bodily injury when using one of your products, letting you handle their property or simply visiting your business. When they do, their losses could be substantial, and if they blame your business then you might have to pay them for their trouble. This financial blow alone could be significant, and if it arises as part of a lawsuit by the affected party, it could be insurmountable for your business.
Therefore, work with your insurance agent to learn what your CGL benefits cover on a base level. Afterwards, the agent can help you determine precisely where your additional coverage needs lie, and what you need to do to increase your benefits.