When is general liability insurance required?
General liability insurance is not required by law for small businesses. However, you might need this policy to sign a commercial lease or fulfill the terms of a client contract.
General liability insurance is the first policy most tech companies purchase
General liability insurance policies are so commonplace, it may seem as if they’re required by law. While businesses aren't legally required to have this coverage, there are a number of circumstances where your business may be required to have it.
You may need proof of general liability coverage before obtaining a license, renting a commercial space for your business, or signing a client contract.
You don't want to let lack of general liability insurance prevent you from growing your business. And without it, you’re also leaving your tech company vulnerable to the most common types of lawsuits.
Scenarios that may require general liability coverage
The three most common scenarios that may require your tech company to purchase a general liability insurance policy involve leasing, licensing, and contracting.
If you’re interested in leasing a property for your tech company, be sure to read your lease carefully and talk with the landlord to see if they require their renters to carry general liability insurance.
Landlords often ask for this policy to protect against third-party lawsuits related to incidents that happen on their property.
For example, if someone slips and falls in your office and is injured, general liability would cover the costs of a related lawsuit.
Local governments will often require you to provide proof of general liability insurance coverage before they'll approve your application for a professional or business license. That proof is typically a certificate of liability insurance.
A general liability insurance policy demonstrates that your business is protected from the most common liability risks.
Some clients won't sign a contract with a tech company unless there's proof of general liability insurance coverage. When meeting with prospective clients, be sure to discuss whether they require contractors to maintain general liability coverage.
Clients require liability insurance because it's a good indicator of your company's reliability. Clients are reassured that you'll be able to compensate them if you injure someone or damage their property.
Additionally, they know that your business's finances are reasonably secure, as a liability policy protects you from many common lawsuits. It also assures that a lawsuit won't interfere with your ability to fulfill your commitment to the client.
What benefits does general liability insurance provide?
Even though it’s not required under any law, having a general liability insurance policy has several advantages. It protects tech companies from the most common third-party (non-employee) lawsuits. That includes suits related to bodily injury, property damage, and advertising injury.
Plus, if you maintain coverage, you don’t have to worry about whether that absence of coverage will prevent you from signing a lease, getting approval for a license, or signing a contract with a client; it’s already in place.
Having a general liability insurance policy also adds a layer of legitimacy to your tech business. Even if it’s not required in your contract, when clients know that you’re insured under general liability insurance, they’ll feel more comfortable doing business with you. It provides evidence that your tech company is financially secure and able to weather a lawsuit or other incident.
How much general liability coverage does my tech company need?
There’s no clear-cut answer to the question of how much general liability coverage you should purchase for your tech company. However, most tech companies elect to choose coverage that includes a $1 million per occurrence limit and a $2 million aggregate limit.
This means that the insurer will pay up to $1 million to cover any single claim, and that, throughout the course of a policy’s lifetime (generally one year), the insurer will pay up to $2 million to cover claims.
General liability insurance costs vary from business to business. It depends on factors like your profession’s level of risk, the policy limits you choose, where your tech company is based, and the number of employees at your company.
Get free quotes and compare policies with TechInsurance
When you purchase general liability insurance, ask your insurance agent if you can combine it with commercial property insurance in a business owner’s policy (BOP). This bundle often costs less than purchasing each policy separately.
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