General liability insurance for small businesses is an essential safety net for entrepreneurs, protecting the company from a variety of risks, including bodily injury, property damage, and legal claims. Yet, many small business owners misunderstand this crucial coverage, leaving them vulnerable.
Today, we’ll tackle 12 common misconceptions about general liability insurance for small businesses to help you make informed decisions and protect your hard work.
What Is General Liability Insurance?
General liability insurance is a fundamental type of coverage designed to protect businesses from common risks. It helps cover costs related to third-party claims of bodily injury, property damage, and advertising injury.
For example, if a customer slips and falls at your business or if your operations accidentally cause damage to someone’s property, general liability insurance can help pay for legal fees, medical expenses, or repair costs. This coverage is essential for safeguarding your business against unexpected incidents that could otherwise lead to significant financial strain.
Approximately 45% of small businesses are currently facing litigation in 2025—if you want to be prepared for the day it might be your turn, it’s time to clear up the confusion. Let’s dive into the most common misconceptions around general liability insurance for small businesses.
1. I’m too small to need insurance
Any business that interacts with customers, vendors, or contractors—even freelancers and home-based businesses—is exposed to potential liability. Whether it’s a slip-and-fall accident or property damage at a client location, the financial implications of a claim can be devastating without proper coverage.
2. It only covers physical injuries
While general liability insurance for small businesses does cover physical injuries to third parties, it goes further. It also includes protection against property damage, personal and advertising injuries, and legal defense costs. Its broad coverage can safeguard your business against various risks.
3. It covers all my business risks
General liability insurance is not a one-size-fits-all solution. It doesn’t cover everything, such as professional errors, employee injuries, or cyberattacks. For these risks, you’ll need additional policies like professional liability, workers’ compensation, or cyber insurance.
4. It covers my employees too
This is a widespread misconception. General liability insurance for small businesses protects against third-party claims, not claims from your employees. To protect your workforce against injuries, workers’ compensation insurance is required.
5. It covers all legal costs
While general liability insurance provides coverage for legal defense fees and settlements, there are limits to this protection. Expenses exceeding your policy’s coverage limits will need to be paid out of pocket, so it’s essential to review your coverage carefully.
6. It’s the same as a business owner’s policy (BOP)
A business owner’s policy (BOP) is a bundled package that may include general liability insurance for small businesses alongside coverage for property damage and business interruption. While a BOP offers more comprehensive protection, it’s not interchangeable with standalone general liability insurance.
7. It covers damages to my own property
General liability insurance generally excludes coverage for damages to your property or equipment. For this, you’ll need commercial property insurance. The two policies complement each other but offer different types of coverage.
8. I’m covered no matter where I work
Your general liability insurance may have geographic restrictions. For example, accidents occurring outside of your primary location might not always be covered unless your policy specifically includes such scenarios.
9. Cyberattacks are included
Cyberattacks and data breaches are not covered under general liability insurance for small businesses. For companies handling sensitive customer data, a separate cyber insurance policy is crucial to mitigate financial losses from these events.
10. It’s too expensive
Many assume that general liability insurance carries a hefty price tag, but the cost is often affordable compared to the potential financial losses from a lawsuit. Rates vary depending on factors like your industry, location, and coverage limits.
11. It’s only required for certain industries
While some industries, like construction or healthcare, have specific liability requirements, nearly all businesses benefit from general liability insurance. It adds credibility and ensures compliance when working with clients or vendors who may require proof of coverage before signing contracts.
12. I’ll never need to use it
Many small business owners think claims won’t happen to them, but the statistics tell a different story. Litigation and accidents are unpredictable, and having general liability insurance provides peace of mind and financial security when the unexpected occurs.
Protect Your Business Today
Misconceptions about general liability insurance for small businesses often lead to gaps in protection. With the right coverage, your business can operate confidently, knowing you’re prepared for any challenges that come your way.
Looking to safeguard your business? Bethany Insurance specializes in creating tailored policies that protect small businesses like yours. Contact our expert team today and ensure your hard work is protected.
