General Liability Insurance

Example

“The bakery's general liability insurance covered the $25,000 settlement when a customer slipped on a wet floor and broke her wrist.”

Memory Tip

Think 'General Liability' covers the 'Generally Likely' accidents that could happen to any business - slips, falls, and property damage.

Why It Matters

General liability insurance protects businesses from potentially bankrupting lawsuits and is often required by landlords, lenders, and clients before doing business. Even small incidents can result in legal costs exceeding $100,000.

Common Misconception

Many business owners think general liability covers all possible business risks, but it excludes professional errors, employment practices, cyber liability, and damage to the business's own property. Additional specialized coverage is needed for complete protection.

In Practice

A small plumbing company has $1 million in general liability coverage. While installing a water heater, they accidentally damage the customer's hardwood floors, causing $8,000 in property damage. They also face a $15,000 lawsuit when the homeowner claims the work caused a subsequent leak. The general liability policy pays the $8,000 property damage, $15,000 settlement, and $12,000 in legal fees, totaling $35,000 that the business doesn't pay out of pocket.

Etymology

Combines 'general' (broad, comprehensive) with 'liability' from Latin 'ligare' (to bind), indicating legal responsibility. This insurance type developed in the early 1900s as businesses needed broader protection than specific coverage types provided.

Common Misspellings

Related Terms

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Other insurance terms you should know

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