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When is Liability Insurance needed?

General liability could be required in some situations

General liability insurance may be required by clients, landlords and regulatory agencies before they issue a professional license.

What is liability insurance?

Liability insurance can protect you and your business if you are found liable for causing an injury to someone other than an employee or damaging their property.

General liability insurance is often the first business insurance policy small businesses purchase due to its broad coverage.

Is General Liability insurance required by law?

Many small business owners ask, “Is general liability insurance required by law?” In general, the answer is no, but you may need to have general liability insurance to:

Sign a contract with a client or partner

Many companies and individuals will only work with businesses that are properly insured.

Get licensed or certified

Depending on your industry, proof of insurance may be required when applying for professional licenses or certifications.

Sign a lease

Property managers regularly require businesses to purchase liability insurance before they lease a commercial space, especially if they plan to be open to the public. Learn more.

How can liability insurance help protect small businesses?

General liability insurance is often required for doing business because it can cover a wide range of potential incidents. Depending on your coverage limits and exclusions, your liability insurance policy could help pay for:

Slip-and-fall injuries

Someone (not an employee) trips at your business, breaks their leg and files a lawsuit. This is often referred to as “bodily injury.”

Property damage

You or an employee accidentally damage a client’s property.

Legal fees & defense costs

You need an attorney to defend your business in a lawsuit after a claim.

Medical payments

Someone (excluding employees) gets injured and asks you to pay for medical expenses.

Reputational harm

An employee bad-mouths a client online and the client sues you.

Advertising injury

You’re sued for improper image use in your advertising.

In all of these examples, general liability insurance can help cover the costs you might have to pay out of pocket. So while not often required by law, it’s easy to see why it may be required by those with whom you do business.

Expanded coverage

If you need to expand your general liability coverage, doing so is easy by adding a rider.

With NEXT, some businesses can add additional coverage to their general liability policy, and any business can add an additional insured.

Liquor liability

If your business serves alcohol, it’s important to know that general liability doesn’t usually provide coverage for accidents that involve alcohol. Liquor liability insurance can provide financial help if you serve a customer alcohol, and someone claims it’s your fault for an injury or property damage.

Product liability

If you make, distribute or sell anything that ends up causing harm to a customer, you might be held responsible. With NEXT, product liability coverage is included in coverage for retail businesses.

Additional insured

Clients or landlords may not only require you to have liability insurance before they sign a contract with you, they may also ask you to add themself as an additional insured on your policy.

By adding them to your policy as an additional insured, should an accident occur, your insurance can not only cover you and your actions, but them as well.

What isn’t covered by liability insurance?

Liability insurance covers many common accidents, but it isn’t designed to defend against everything. Many business owners consider other types of coverage for protection from other risks:

Employees

Should one of your employees get injured or ill while on the job, your liability insurance won’t help cover the costs because they aren’t “someone else.” To protect your staff and your business should something happen, workers’ compensation insurance can help cover medical bills and even lost wages.

Professional mistakes

Accidents are one thing, but if you make a professional mistake that costs a client money, they could sue for damages. Professional liability insurance (also known as errors and omissions insurance) can help cover business mistakes, accusations of negligence, and even missed deadlines.

Your property

Liability insurance can help pay for harm caused to others, but not to you. Commercial property insurance protects your building, goods, gear, inventory, and can even cover lost income if your business needs to close.

Keep your business covered with NEXT

NEXT is 100% committed to helping small businesses. That’s why we make customizing your insurance easy with 24/7 DIY access.

You can start a quote, customize your options and access your certificate of insurance online in about 10 minutes.

Manage and update your policies when the time is right for you, not just during business hours.

Start your instant quote today.

Let’s find the coverage you need for your business

Business insurance is divided into different policies. We offer seven types so it's easy to design the coverage that fits your business.

General Liability insurance
General Liability

Protect yourself from accidents that cause physical injury or damaged property.

Professional Liability or Error and Omissions Insurance
Professional Liability/E&O

Shield yourself from lawsuits that claim your work errors caused financial losses.

Workers' Compensation Insurance
Workers’ Compensation

Cover medical bills and lost wages if your employees have an accident at work.

Commercial Auto Insurance
Commercial Auto

Stay on the road with coverage for dents, tows and damage to someone else’s vehicle.

Tools & Equipment Insurance
Tools & Equipment

Upgrade your general liability coverage to protect any gear that’s stolen, damaged or lost.

Commercial Property Insurance
Commercial Property

Keep your building, inventory and equipment protected from fire or water damage.

Business Owner’s Policy Insurance
Business Owner’s Policy

Combine general liability and commercial property into one policy to protect your business.

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© 2023 Next Insurance, Inc. 975 California Ave, Palo Alto, CA 94304, United States
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Issuance of coverage is subject to underwriting. Not available in all states. Please see the policy for full terms, conditions and exclusions. Coverage examples are for illustrative purposes only. Your policy documents govern, terms and exclusions apply. Coverage is dependent on actual facts and circumstances giving rise to a claim. Next Insurance, Inc. and/or its affiliates is an insurance agency licensed to sell certain insurance products and may receive compensation from insurance companies for such sales. Policy obligations are the sole responsibility of the issuing insurance company. Refer to Legal Notices section for additional information.