General business liability insurance also protects a business owner faced with a lawsuit or other claim brought about by an outside party. General liability coverage includes financial liabilities the company incurs as well as expenses related to the company’s legal defense. Small business owners may need general business liability coverage to protect their personal assets from becoming targets of a lawsuit, as sole proprietorships and partnerships do not differentiate between assets held by the business entity and those held by the owners as individuals.
Small business owners should be aware of the limits on general business liability coverage. If the company faces a judgment that exceeds the limits placed on its policy, it must come up with the difference. For small businesses operating on slim margins, this difference can be a crippling expense. Business owners can either expand their coverage and pay higher premiums or add on excess or umbrella coverage to increase those limits.