As a small business owner, you may be wondering how much business insurance you actually need and how much is simply insurance companies trying to sell you expensive policies. Navigating the waters of business insurance can be confusing and time consuming, but it’s necessary to make sure your business is protected.

There are some insurances that are required by certain states, such as commercial auto insurance and workers compensation. Others may not be legally required, but these policies are the ones that can save you the most grief.

General liability insurance isn’t required for most businesses, but this insurance can save you a lot of issues in the future. Say you’ve just opened the doors to your grocery store. It’s been a week and things are running smoothly, your staff happy and customers pleasant. A customer’s child accidentally spills their drink on the floor and hurries off. Before an employee notices it, an older customer unwittingly steps into the spill and slips, twisting their ankle and breaking their wrist in an attempt to catch themselves.

There are a few things that could happen. Once the customer receives medical attention, they could simply pay for the ambulance, x-ray and other medical expenses and go on their way. As you might expect, this is unlikely. It’s more likely that the customer will expect your grocery store to provide compensation for the medical bills, since they were injured in your store. If you don’t have a general liability policy, this can mean a lot of money and a possible legal battle. If you’ve just started your business, you aren’t likely to have enough cushion to pay for medical expenses and legal fees. The last thing a new business owner wants is for one accident to turn into a battle that leaves the business with no income and a bad reputation.

What Does General Liability Insurance Cover?

General liability insurance covers three main areas:

• Property Damage: This liability insurance provides compensation if a third party’s property is damaged in relation to the business.
• Bodily Injury: Bodily injury liability provides compensation for medical bills if a third party is injured on the property or as a result of non-professional negligent acts.
• Advertising Injury: Advertising injury liability covers claims of libel, slander, copyright infringement and more.

Along with paying compensation for damage and injury that the business is found liable for, general liability insurance also helps pay for legal costs if the victim decides to sue the business.

How Much Does General Liability Insurance Cost?

There are many factors that affect the cost of general liability insurance, such as:

• Location
• Size of the business
• Risk of the industry
• Claims history
• Policy limits
• Payroll
• Annual revenue

If your industry is considered a high-risk industry, such as construction or medicine, you may pay higher premiums due to the likelihood of a claim being filed.

You can also save money by bundling your general liability insurance with property insurance with a business owners policy (BOP). Property insurance protects the business’ structure and contents when damage occurs due to fire, smoke, lightning, hail, theft, vandalism and more. A BOP is a single policy that combines general liability and property insurance for small businesses.