When is General Liability Insurance Required?

Contrary to popular belief, general liability insurance isn’t typically required by any state or federal law in the U.S. The only time a type of general liability insurance is required by law is in regards to operating a vehicle, where you will need to carry certain limits of bodily injury and property damage liability according to your state’s requirements. Your business, on the other hand, may not be required to carry general liability insurance by law. man turning open sign

That said, while general liability insurance might not always be a legal requirement for your business, it may be mandated by other means:

Contracting requirements. If you are a contractor or are hiring contractors, you may be required to carry general liability insurance by the other party. Failing to do so can lead you to being unable to work on certain projects.
Landlords renting out business or event properties may require that their tenants carry general liability insurance.
Certain professional guilds and unions may require that you invest in general liability insurance.

While there may be official mandates on insurance within your industry, they're not typically going to be legally binding until you've signed a contract. You may be required to carry insurance if you want to work with a certain distributor or rent a certain location. But beyond concerns like these, you're essentially free to handle the risks of owning a business however you like.

It's not advisable to run a business without general liability insurance. It may limit your options, or it may hobble your business in the long run. But it's not illegal to run a business without general liability coverage.

If you have the money to cover all likely damages out of pocket, you might find it appealing to go without insurance. But before you make your decision, consider what those costs will be:

The average slip and fall claim costs around $30,000 to $40,000
The average customer injury claim costs around $35,000

Reputation harm claims can cost an average of $50,000

Maybe a multinational corporation can easily cover all that out-of-pocket. But the average small business might not. Remember that you are going to be covering your own legal fees as well. Just having a lawyer look at the case is likely to wind up costing you more than your annual premiums would have been. Connect with an insurance agent about insuring your business with the right general liability insurance policy.

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