Commercial general liability insurance protects you from claims of property damage or bodily injury allegedly caused by your business and its employees. It’s the starting point for many companies and their journey to comprehensive insurance coverage. But there’s no doubt about it — CGL can be confusing and convoluted.
So, we’re giving you the ultimate guide to commercial general liability insurance. Don’t worry; we’ve made it incredibly simple to understand.
What Is Commercial General Liability Insurance?
Commercial general liability insurance (often shortened to CGL) is a policy that gives you financial coverage for claims of third-party property damage or bodily injuring inflicted by your company from unexpected incidents or negligence.
If somebody sues your business, your commercial general liability policy usually covers legal defense costs and compensatory damages. While the specifics change depending on various factors, it typically pays out regardless of the lawsuit’s result.
What Does Commercial General Liability Insurance Cover?
Commercial general liability insurance usually includes coverage for damages and any legal costs that apply to the areas below:
- Bodily injury — CGL policies help mollify your loss if your business is deemed liable for an injury to a third party (customers, maintenance staff, delivery people, employees, vendors, other visitors) both on or off your business premises. For instance, if a customer slips on your shiny tiled floor, they can begin legal proceedings against your company for any incurred injuries. Even if your business isn’t directly liable, a customer can still decide to file a lawsuit since it occurred on your premises. The bodily injury clause protects you from the potentially enormous financial outputs for expenses associated with lost wages, medical bills, and pain and suffering.
- Personal and advertising injury liability — Sometimes known as Coverage B, personal and advertising injury liability is included automatically in your CGL insurance. However, the limitations of the coverage can depend on your specific policy and your business sector. Usually, it protects your company against litigations like copyright infringement, libel, slander, false advertising, invasion of privacy, stolen ideas, or defamation. Your policy covers the legal costs and any applicable payouts of these claims made about yourself, your business, and your employees.
- Product liability — Product liability mitigates any costs associated with claims alleging a product you sell, make, or distribute caused bodily injury or damage. Typically, this part of the commercial general liability insurance policy covers marketing, design, and manufacturing defects like incorrect safety warnings.
- Tenant’s legal liability — This part of your policy covers the costs of repairing or replacing others’ property that you occupy or lease. It’s also known as commercial tenant insurance and can pay for any legal fees involved, settlements, and orders to pay awards and damages, if applicable.
What Doesn’t Commercial General Liability Insurance Cover?
While all policies are different, the average commercial general liability insurance plan in Canada does not cover the following:
- Intentional criminal acts
- Liability claims caused by negligent acts that aren’t related to bodily injury or property
- Contractual liability
- Patent infringement
- Professional services or the advice you provide
- Automobiles or motor vehicles
To ensure your business is covered in the above eventualities, you can take out other standalone insurance policies.
Who Needs Commercial General Liability Insurance?
No matter what kind of business you run, you need insurance. Therefore, regardless of the size of your company and what market sector you operate in, commercial general liability insurance is beneficial.
If your business has one or more of the following characteristics, you should purchase a CGL policy:
Your Business Sells or Serves Food and Beverages
Diners, cafes, bistros, restaurants, and similar companies face a huge risk — customers fall ill due to their food or drink. Should this nightmare occur, your CGL policy pays for legal and medical costs associated with the case.
Your Business Makes or Sells Products
No matter what product you manufacture or sell, customized commercial general liability insurance protects you from monetary loss if your product causes illness or injury.
Your Business Provides a Service that May Damage Property
Do your employees provide services like installations, repairs, or constructions close to or inside third-party properties. If so, your insurance covers you if the property incurs damage due to your company’s operations.
Third Parties Visit Your Business Premises
If your company has a brick-and-mortar location visited by third-party entities like suppliers or customers, your CGL policy protects against any injuries inside your premises. Faulty furniture or no wet floor signs on a spill can result in costly financial consequences without adequate insurance.
Your Business Could Cause Reputational or Personal Damage
In the event you’re sued for slander or libel, your commercial general liability insurance should pay the legal fees. Any business can fall into this category, making CGL a must-have for all companies.
How Much General Liability Coverage Do You Need?
We’ve established that you need general liability coverage, but the next question you probably have is, “but how much do I need?”
Truthfully, the only way to find out exactly how much coverage you need is to let our experienced team at LiabilityCover connect you with a licensed broker that has industry-specific experience. They look at all aspects of your business and tailor plans to suit your needs.
However, we can provide you with a baseline that’ll give you a headstart.
Get to Know Your Business
Even though you can’t predict the future, you can get a rough idea of how much CGL insurance you need by knowing your business. When considering the coverage amount you should purchase, consider the following questions:
- What type of business do you own?
- How big is it, and how many employees do you have?
- Who are your customers and target market?
- Where is your company situated? Do you have multiple locations?
- Where is your business headquarters?
- Do your employees have a lot of experience?
- Are you the sole owner of your business? If not, what ownership structure do you have?
Essentially, the more risk you have, the more insurance you need. And it’s unlikely your business stays the same throughout its lifetime. So, as it changes, you may need to rethink your commercial general liability insurance coverage too.
Tailor The Basic CGL Policy
Once you can answer the questions about your business, you’ll have a clearer idea of the amount of coverage you need. Most insurers allow you to tailor your policy by purchasing endorsements (also known as policy enhancements or add-on coverages). They can protect your company from liquor liability, fire damage, cyber attacks, and more.
Talk to Us
As we touched on earlier, you’ll never truly know how much coverage you need until you speak with a professional. So, get in touch, and we’ll connect you with some of the best commercial general liability insurance providers in Canada.
How Much Does Commercial General Liability Insurance Cost?
The majority of commercial general liability insurance policies cost between $450 and $500 per annum for small or medium businesses in Canada requiring $2 million worth of coverage. Although, some policies cost over $1,000 a year.
The cost can vary depending on a variety of factors, including:
- Your industry sector — Every business carries risks. However, there’s no denying that some come with higher risk levels than others. The higher your risk level, the more likelihood of a claim, and thus, you’ll pay more for commercial general liability insurance policies. For instance, if you work in the construction industry, expect to pay a higher premium than someone running a marketing agency.
- The number of employees in your business — You’re an employer. Therefore, you could be held responsible for your employee’s actions if somebody makes a general liability claim against them. Your likelihood of a claim increases as you grow your workforce, and thus, so does your CGL premium payment.
- Your revenue — While a high revenue is fantastic for your business, it shows insurers that there’s much more at stake if you need to make a claim. So, it raises the cost of your policy. When their client makes a claim against your highly profitable business, all lawyers see is dollar signs. Third parties are likely to ask for more compensation as they know your revenue can cover it.
- Your years of experience — As you gain experience, the likelihood of you making a mistake decreases. Your policy becomes cheaper the longer your company operates in your market sector because insurers can see you’re more capable of conducting your daily tasks without problems.
- Your insurer — Of course, insurers price their policies differently. Our team at LiabilityCover can connect you with brokers and agents offering the best value for money.
Is Commercial General Liability Insurance The Only Coverage You Need?
Businesses tend to secure commercial general liability insurance first since it covers all the basics — facing third-party legal action is a nightmare no business wants to come into fruition.
However, that doesn’t necessarily mean that this coverage by itself is enough. Your company is multi-faceted. Therefore, you need to build a comprehensive insurance plan that consists of multiple standalone policies to cover areas CGL policies cannot.
Depending on your business, you could have a plethora of extra risks that go unprotected by this insurance type. Below, you’ll find a few examples:
- The work you do involves high-risk environments that put employees in danger of getting ill or injured.
- You have a fleet of commercial vehicles that could get into an accident, be vandalized, or be stolen.
- You rely on a transport or courier company. In such cases, you need coverage to protect against lost, damaged, or stolen goods while in transit.
- You serve liquor.
- You store sensitive information digitally and are therefore exposed to adverse cyber events.
With all that in mind, we recommend considering purchasing some of these policies in addition to commercial general liability insurance:
Cyber Risk and Data Breach Coverage
Cyber liability insurance covers the legal and other costs related to cybercrime that involve technological systems and your client’s data.
Cyberattacks are usually expensive, so you need to purchase this type of insurance if:
- You store data in the cloud or computer systems.
- You use a point-of-sale system of any kind.
- You store sensitive data like patients’ medical records or customers’ credit card information.
- You give hardware or software services to your clients.
The policy protects you if cybercriminals take over your website, steal clients’ sensitive data, or infiltrate your business. You might also want to consider cybercrime insurance which reimburses any loss of funds following cybercrimes like social engineering fraud and phishing.
Commercial Property Insurance
Different insurers refer to commercial property insurance in varying ways, such as:
- Commercial rental insurance
- Commercial building insurance
- Business contents insurance
- Business property insurance
But no matter the name, it’s the same thing.
It gives you financial coverage for the physical damage or loss to your business property and its contents in the event of disasters like fires, vandalism, or theft.
Most insurance specialists (including us) recommend a commercial property insurance policy if any of the following apply to your company:
- You or any employees operate business off your premises
- You have a commercial or office space.
- You lease or own a commercial space, inventory, or equipment.
- You use portable devices like mobile phones, tablets, and laptops.
- Your business uses computers, machinery, or hardware to conduct its operations.
Directors and Officers Insurance
Directors and officers insurance (otherwise called D;O) covers the costs related to indemnification, legal defence, or losses against a person who is an officer or director for a corporation’s board. Whether you’re on the board of a for-profit, non-profit, private, or public corporation, you’ll benefit from the policy.
As a director or officer, you can be liable for claimed actions, such as:
- Negligence in your duties
- Breach of the fiduciary responsibility
- Breach of common law duties
Depending on a number of factors, your directors and officers insurance could have three clauses:
- Directors and officers liability (Side A) — It protects officers’ and directors’ assets if your company can’t pay for indemnification.
- Company reimbursement (Side B) — When your business defends its board, this part of the policy covers all associated legal costs.
- Entities security coverage (Side C) — It extends the policy’s coverage for public companies’ securities claims.
If you’re a private company or a non-profit, you probably need the first two clauses only. But public companies benefit from ABC policies.
Equipment Breakdown Insurance
The commercial property insurance we discussed earlier typically covers any equipment damage sustained due to fires, floods, weather damage, or other external disasters. However, it won’t necessarily cover it should mechanical or electrical damages occur — that’s where equipment breakdown insurance comes into play.
The most common types of businesses that should take out equipment breakdown insurance include the following:
- Restaurants, bakeries, and cafes that need electrical kitchen equipment and can’t function without it
- Skilled tradespeople who need to use tools and equipment on job sites
- Landlords with CCTV systems, air conditioning, or generators
Professional Liability Insurance
Professional liability insurance, sometimes known as errors and omissions insurance or malpractice insurance, protects you from claims made by clients alleging monetary loss due to your provided service. It also covers lawsuits claiming misconduct, failure to deliver the service as promised, and negligence.
Like all kinds of insurance, the coverage limits and specifications vary. However, most professional liability insurance policies provide the following coverage:
- Products — It covers you if the product fails or causes a physical injury to the user.
- Media and advertising — This section of the policy covers your media services should your client get sued for libel, defamation, or slander.
- Professional services — It covers negligent acts, errors, omissions, or failing to deliver a service to the standard promised.
Commercial Auto Insurance
Sometimes called commercial vehicle insurance or business auto insurance, it covers vehicles (trailers, cars, vans, trucks, etc.) used for work purposes. You should have a commercial auto insurance policy if you have a company vehicle that transports people, packaged goods, materials, equipment, or tools.
The cost changes depending on:
- Your driving experience and record
- The kind of vehicle you need to insure
- Your gender
- Your age
- Where you store your vehicles and your work address
- How far you drive every year
Liquor Liability Insurance
If you serve alcohol, you could be held liable for damages or injuries that occurred when the alcohol plays a contributing role in the situation.
There are various types of liquor liability coverage you need, based on how you handle the liquor, as you can see below:
- Liquor liability as an occupier — In this case, your company possesses or is responsible for protecting people from certain preventable harm.
- Liquor liability as a server — You are responsible if you serve alcohol to people who are beyond the point of intoxication.
- Liquor liability as a sponsor of dangerous activities — The risks involved with certain activities increases or become more likely when alcohol is involved.
- Liquor liability as an employer — You might be responsible for taking care of employees who drink too much alcohol at events like staff Christmas parties.
- Liquor liability and use of force — Security staff are not permitted to use unnecessary or excessive measures to handle intoxicated people.
Why Choose LiabilityCover?
So, why not go straight to a broker? Why use our service? The answer is simple — we make your life easier.
Approaching brokers yourself gives you handfuls of quotes with various coverage limits and prices, making it super hard to decide. But with LiabilityCover, we assess our network of licensed, experienced brokers and agents, and connect you with the best fit for your business.
We get you results quickly at ultra-competitive rates. The real question is, why not choose LiabilityCover?
Frequently Asked Questions
What’s the Difference Between Commercial General Liability Insurance and Public Liability Insurance?
Both commercial general liability and public liability insurance are major types of insurance for businesses. The differences lie in the aspects the policies cover.
Public liability insurance protects your business against losses related to injury, property damage, property loss, and other losses caused by third parties on your premises. It’s considered the “bare minimum” for many companies, namely those in the public access or retail sphere.
On the other hand, commercial general liability insurance deals with a wide range of legal problems. It’s designed to protect against:
- Liabilities from accidents in the workplace
- Liabilities from defective products
- Liabilities from employee negligence
- Liabilities from injuries to both the public and employees
You get a superior level of coverage, but it’s typically more expensive than public liability insurance.
Who is The Third Party?
Where insurance is concerned, a third party is anybody you come into contact with as a business owner, including vendors, other businesses, and clients who could be involved in an accident or claim against your business.
However, it doesn’t cover employees or sub-contractors as you need to take out separate insurance coverages to protect against these groups.
Who Can Sue Your Business for Property Damage or Bodily Injury?
Put simply, anybody can sue you, including your:
- Visitors
- Service providers
- Clients
- Vendors
They can sue you for a wide arrange of costs like pain and suffering, lost wages, medical bills, and the replacement of damaged property.
Is Commercial General Liability Insurance a Legal Requirement in Canada?
No, it’s not a legal requirement in Canada. Although, sometimes it’s mandatory because a client requests you to have it or your commercial landlord requires it before they allow you to sign a lease agreement.
However, as we’re sure you know by now, all businesses benefit from CGL. Why? Because a single claim can cause a catastrophic financial burden and cease operations.
How Do You Get Commercial General Liability Insurance for Your Business?
Getting commercial general liability insurance with our help is easy. Just follow these steps:
- Submit a request on our site.
- We look at your insurance requirements based on your request.
- We connect you with a licensed insurance agent or broker with extensive experience with businesses in your industry or profession.
- The agent or broker we assigned contacts you so you can obtain the perfect insurance plans for you.
