Starting a small business often comes with big dreams and endless to-do lists. What many entrepreneurs overlook, however, is how vulnerable their businesses are to lawsuits. Legal claims aren’t reserved for large corporations—studies have shown that nearly one in three small businesses will face a lawsuit or threat of one at some point, many of them with revenues under $1 million.
The financial strain of even a single legal dispute can be devastating. That’s why general liability insurance is considered one of the most important forms of protection for small business owners. It can cover legal expenses, settlements, and other costs that could otherwise put your business at risk.
What Exactly Is General Liability Insurance?
General liability insurance (GLI) is designed to protect your business when third parties claim they’ve been harmed by your operations. This might include allegations of bodily injury, property damage, or certain advertising-related issues. Instead of paying costly legal bills and settlements out of pocket, your policy steps in to cover many of these expenses.
Here are some of the common risks general liability insurance addresses:
- Bodily injury to third parties – For example, if a customer slips and falls in your shop, you could be held responsible for medical bills and damages.
- Damage to someone else’s property – If your employee accidentally breaks a client’s window while working on their home, your policy can help pay for repairs.
- Reputational harm – Businesses can be sued for libel or slander if an employee’s statements harm another person or company.
- Advertising injury – Claims of copyright infringement or improper use of content in marketing campaigns may also be covered.
What General Liability Insurance Doesn’t Cover
While GLI provides broad protection, it isn’t all-encompassing. There are several areas where it does not apply, including:
- Employee injuries – Workplace accidents are handled through workers’ compensation insurance, not GLI.
- Damage to your own business property – You’ll need property insurance for that.
- Internal disputes – Lawsuits from employees, such as wrongful termination or discrimination claims, are not covered.
- Professional errors – Mistakes in services or advice fall under professional liability insurance rather than general liability coverage.
In short, GLI is best viewed as one layer of protection that should be combined with other policies for complete coverage.
How to Find the Right Policy for Your Business
The best approach is to work with an insurer that offers a business owner’s policy (BOP). These bundled packages often include general liability insurance along with property, auto, management liability, and workers’ compensation coverage. A bundled plan not only provides more complete protection but also simplifies policy management by keeping everything under one provider.
You can also customize your coverage to suit your business’s specific risks. For example, a construction company may need higher limits for property damage, while a marketing firm may want additional protection for advertising claims. Comparing options from multiple insurers can help you balance affordability with comprehensive coverage.
Final Thoughts
General liability insurance is not optional—it’s essential. Small businesses face real risks, and even one lawsuit can drain resources and threaten survival. By investing in the right policy, ideally as part of a broader business insurance package, you can protect both your finances and your future growth.
Take the time to evaluate your risks, explore different providers, and choose a plan that fits your budget and business needs. A solid general liability policy is one of the smartest investments you can make as a small business owner.
