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General Liability Insurance Requirements

May 11, 2023 · 5 minutes to read

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The United States is home to millions of small businesses. Each is unique, with different needs and risks to consider when buying insurance. But there is one type of insurance that may be necessary no matter what industry or occupation you work in: General Liability.

General Liability insurance is a basic form of coverage for many small businesses. It covers claims of injury or property damage that are brought against you by clients, customers, suppliers, and other members of the public.

In many cases, having a policy may be necessary to work in your field, accept specific jobs, and enter into business agreements. Let’s dive deeper.

Is General Liability insurance required by law?

Small businesses are not usually required by law to have General Liability insurance. However, it may be necessary to get a professional license in certain fields and other work situations (more on this later).

Your state may legally mandate other types of insurance. Workers’ Compensation is one such coverage, with every state except Texas requiring businesses to have a policy. Before you accept your first client or project, be sure to check the insurance rules in your area to avoid fines or unnecessary business closures.

When is General Liability needed by small businesses?

General Liability insurance may not be required by law, but you may still need a policy to do business. It might be necessary to become licensed, accept specific jobs, and enter some business contracts.

Getting a professional or trade license

A professional or trade license may be necessary to work in some occupations, and you may need General Liability insurance to get your license. This requirement applies to tradesmen in many states, for example:

  • Electrical contractors in Ohio must have at least $500,000 in General Liability coverage to become licensed.
  • California tradespeople need a General Liability policy to receive a Class C-5 or Class C-6 carpentry license.
  • You must show proof of General Liability insurance to receive a certified or registered general contractor license in Florida.

Professional occupations, such as accountants and real estate agents, may also need minimum levels of General Liability insurance to become licensed or join a professional association.

If you are seeking a professional or trade license, it’s always best to check the current requirements in your area to ensure you are meeting them.

Working as a contractor or subcontractor

General Liability insurance may be a requirement to work as a contractor or subcontractor for another company. Though the business that hires you should have their own policy, they will likely want you to have a policy as well. Company insurance requirements are typically written into project contracts.

Requiring contractors to have General Liability policies helps businesses better manage project risks. Their policy may not adequately protect the contractors they hire. Companies may also want to avoid claims made to their policies when they could be made to yours instead.

Leasing commercial business space

You may be unable to rent an office, studio, warehouse, or other workspaces without General Liability insurance. Like companies that hire contractors, commercial landlords may prefer that certain claims be made to your policy instead of theirs.

General Liability insurance limits are typically written into lease contracts. It’s wise to review your lease for insurance requirements, including the minimum amount of coverage you need to have.

How much General Liability do I need?

This is a question with no easy answer! Every small business is different, and your General Liability insurance needs will be based on factors that make your business unique, such as:

  • Your annual revenue
  • How many employees you have
  • The size of your office or workspace
  • Whether clients, customers, or members of the public visit your workspace
  • If you routinely visit clients and customers in their homes or workplaces

Finding General Liability insurance for your business

No matter what business you are in, BizInsure can help you find a General Liability policy that works for you. Click, compare, and cover your small business in 10 minutes with no complicated paperwork or waiting. That’s instant coverage straight to your inbox!

Start comparing quotes now and experience business insurance simplified today.

*As with any insurance, coverage will be subject to the terms, conditions and exclusions contained in the policy wording. The information contained on this web page is general only and should not be relied upon as advice.
**This information is a general guide only and does not take into account your objectives, financial situation or needs. Always check with your local licensing board when getting or renewing your electrician’s license to ensure you are meeting their current licensing requirements.
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