No, you are not legally required to purchase general liability insurance. However, many business transactions may require it. For example, commercial leases, client contracts, and certain professional licenses often demand proof of general liability coverage.

General liability insurance covers common risks that arise from interactions with individuals outside your company. This includes protection against customer property damage, bodily injuries (e.g., a customer slipping on a wet floor), slander, copyright infringement, and other advertising injuries.

The amount of general liability insurance you need depends on factors such as the type and size of your business, number of employees, and the type of customers you typically work with. However, many small businesses opt for the standard $2 million / $1 million general liability policy. This means the policy will pay up to $1 million to cover any one claim, with a $2 million limit for the lifetime of the policy, which is typically one year.

General liabilty insurance for contractors provides protection when a customer or client holds you liable for an injury or property damage. Your clients may require you to obtain this coverage before entering into a contract. Certain industries, such as construction, require independent contractors to carry general liability insurance. Even when it’s not required, an independent contractor might purchase this coverage to safeguard against common lawsuits.

Examples of general liability claims include:

• A customer slips in a spill at your business, breaks a wrist, and sues to recoup medical expenses.
• An employee drops a customer’s smartphone and it shatters. The customer sues for damages.
• An employee makes disparaging remarks about a competitor, who sues for slander.

• Update Building Infrastructure: Ensure your roof, HVAC (heating, ventilation, and air conditioning), electrical systems, and plumbing are up-to-date and well-maintained.

• Install a Central Alarm System: A robust central alarm system can deter theft and reduce risk.

• Maintain Adequate Lighting: Ensure all areas, inside and outside, are well-lit to prevent accidents and deter criminal activity.

• Regular Electrical Inspections: Schedule routine maintenance and inspections for electrical systems to prevent potential hazards.

• Install Comprehensive Fire Safety Systems: Equip your property with up-to-date sprinkler systems and fire extinguishers to mitigate fire risks.

• Implement Safety Training Programs: Regularly train employees on safety protocols and maintain detailed records of training sessions.

• Optimize Cash Handling Procedures: Minimize the amount of cash kept on premises and make frequent bank deposits to reduce the risk of theft.

• Reinforce Security Measures: Install security cameras and hire security personnel if necessary.

• Improve Building Accessibility: Ensure your property meets all accessibility standards to reduce liability risks.

• Maintain Outdoor Areas: Keep walkways, parking lots, and entryways clear of hazards to prevent accidents.

Construction Businesses: Employers with one or more employees, including the business owner if they are a corporate officer or LLC member, must provide workers’ compensation insurance.

Non-Construction Businesses: Employers with four or more employees, including the business owner if they are a corporate officer or LLC member, must provide workers’ compensation insurance. Sole proprietors or partners in a partnership are not considered employees unless they opt to be included on the policy1.

• Seek Emergency Help: If the injury is serious, call 911 immediately.

• Provide First Aid: Administer first aid if necessary and ensure the employee is comfortable.

• Report the Injury: Notify your workers’ compensation insurance provider and fill out any required forms.

• Document the Incident: Gather details about the incident, including witness statements and photos.

• Investigate: Determine the cause of the injury to prevent future occurrences.

• Communicate: Keep in touch with the injured employee and offer reasonable accommodations if needed.

• Follow Up: Ensure the employee receives appropriate medical care and support during recovery.

Workers’ compensation insurance can help protect your business and employees in the event of a covered loss, but certain situations that occur on the job are not covered. These exclusions vary by state and are determined by different state laws.

Examples of What Workers’ Compensation Plans Do Not Cover:

• Injuries resulting from a fight that an employee started

• Injuries an employee sustains due to being intoxicated at work

• Injuries an employee intentionally causes to themselves

• Emotional injuries that are not accompanied by a physical workplace trauma