Every year, small businesses pay more than $100 billion in legal fees for various liability claims.

To protect themselves, contractors buy many different types of coverage. Each one has a unique purpose.

Workers’ comp insurance covers lost wages, recovery costs, and medical bills of employees. Meanwhile, commercial property insurance covers damage to your own property.

However, what about injury and property damage claims made by non-employees?

In short, this is where general liability insurance comes into play.

If you’re not sure why general liability coverage is necessary for your business, read on!

Understanding General Liability Coverage

General liability insurance provides coverage against third-party lawsuits. In particular, it covers the following:

  • Property damage
  • Injury
  • Claims of reputation damage
  • Copyright infringement

The first thing to note is that it doesn’t cover commercial property damage. Instead, a general liability plan only covers damage caused to someone else’s property.

Second, it only covers injuries to third-party individuals, not employees. But this coverage does include most injuries caused by employees.

There are also other liabilities and expenses that this type of insurance won’t cover. These include the following:

  • Data security breaches
  • Employment disputes
  • Vehicle damage
  • Professional mistakes
  • Intentional acts

Why It’s Necessary

Businesses in construction are extremely vulnerable to property damage claims. This is due to the fact that most construction work occurs on properties owned by third parties.

However, there are also other good reasons to own this type of insurance.

Employers are responsible for injuries caused by contractors without general liability coverage. As a result, many employers won’t even consider hiring contractors that don’t carry their own insurance.  If you fail to provide them with the peace of mind they’re looking for, they’ll look elsewhere.

While you’re not required to have general liability coverage in California, it’s a good idea to buy it. California law requires you to disclose a lack of coverage in writing.

Benefits of General Liability Insurance

Overall, there are several perks to having this type of insurance.

First, it increases your reputation. This can help you stand out from other contractors that don’t have insurance. Not only will you get more work, but you may land bigger projects as well.

Next, it can give your employees peace of mind. They can work confidently knowing you have a plan in place.

Finally, it increases the stability of your business. Court and attorney expenses can bankrupt many small businesses. With this type of coverage, you can rest easy knowing your business will survive.

Final Thoughts

Regardless of how careful you are, accidents can occur at any time. This is especially the case in the construction industry, which is riskier than most. Getting general liability insurance helps safeguard against expenses resulting from third-party claims.

Keep in mind that it only takes one lawsuit to devastate your business. Without a general liability plan, you risk catastrophic financial losses.

Also, remember that many clients refuse to work with a business that doesn’t carry insurance. In some cases, they might demand to see proof of coverage before moving forward on a project.

If you need general liability coverage, request a price quote from us today!