Getting business insurance is an important step for any entrepreneur, but navigating the requirements can be confusing. Many small business owners wonder – do I need a business license to get general liability insurance?
The short answer is no. You do not need a formal business license to get liability insurance for your business. However, there are a few caveats to consider. Keep reading to learn more about general liability insurance, when you need a license, and how to get the coverage you need even without official business registration.
What is General Liability Insurance?
General liability insurance is a type of business insurance that provides financial protection if your business is sued for bodily injury, property damage, personal injury, or advertising injury.
For example, if a customer slips and falls in your store, general liability insurance helps cover their medical bills and protects your assets, like your business bank account. It also helps pay for a lawyer to defend you if a lawsuit is filed.
General liability policies help small business owners, entrepreneurs, and independent contractors manage risk. The insurance covers legal claims from clients, customers, vendors, and third parties.
When Do You Need a Business License?
Here’s the deal – no federal law requires a formal business license to operate. Licensing rules vary widely between states and local jurisdictions.
Small businesses like consultants, freelancers, and gig economy workers operate just fine without an official business license. However, some cities and states require registration or licensing depending on your profession and location.
For example, contractors typically need licenses to operate legally, as do many service professionals like accountants, lawyers, real estate brokers, tattoo artists, etc. States require business licenses for sellers who collect sales tax.
Bottom line – licensing rules are complex and vary. Researching the requirements based on your business activities and locations is smart.
Can You Get General Liability Insurance Without a License?
This is the big question for entrepreneurs – Can you get insurance to protect your business without having a formal business license?
The answer is yes! You can get a general liability insurance policy to cover your small business without having a license.
General liability insurance providers only care that you have an insurable business entity. Professional liability carriers will issue a policy if you have a legitimate business, even a freelance or consulting operation, from your home office.
The key is fully disclosing your business activities so the insurance company can assess risk and determine appropriate coverage and premiums.
Do You Need General Liability Insurance?
If you’re running any business, it’s wise to consider general liability protection. Here are a few examples of operations that need coverage:
- Consultants, freelancers & independent contractors
- Handymen, landscapers & contractors
- Personal trainers & fitness instructors
- Photographers & videographers
- Professional service providers like accountants, lawyers & consultants
- Retail shops, restaurants & other storefronts
- Tradespeople like electricians, plumbers & builders
- Trucking companies & delivery businesses
- Venues that host events
Any business that interacts with customers or clients needs liability insurance. Otherwise, you risk personal assets in case of an accident, injury, or other covered claim.
Home-based businesses and online sellers need protection if a product injures an end user or damages property.
What Does General Liability Insurance Cover?
General liability policies cover third-party bodily injury and property damage claims. For example:
- Customer slips and falls in your store
- The client gets sick from tainted food at your restaurant
- An employee from another company gets hurt while working at your office
- Vendor accidentally damages your equipment while making a delivery
These policies also cover personal and advertising injuries:
- False advertising allegations
- Libel, slander & defamation of character offenses
- Copyright infringement & misappropriation of likeness
- Invasion of privacy & other personal injuries
Policies also provide coverage for legal defense costs if you’re sued.
How Much Does General Liability Insurance Cost?
General liability insurance rates vary based on your risk exposure. Factors like your industry, years in business, location, and claims history impact premiums.
That said, general liability insurance costs just a few hundred dollars a year for many small businesses. Price can range from $500 – $2,000+ annually, depending on your profession and coverage limits.
Getting quotes from multiple insurance providers is the best way to find an affordable policy. Comparing premium costs lets you find the best coverage at the lowest price.
Where to Get General Liability Insurance Quotes
If you need an easy and affordable way to get liability insurance quotes online, we recommend covering your business with Insureon.
Insureon makes it simple and convenient to compare policies from top insurance carriers all in one place. The insurance marketplace has helped over 150,000 small businesses get the necessary coverage.
Insureon’s licensed advisors guide to help you pick the right insurance at the best price. You can easily purchase general liability insurance online and even add other important policies like:
- Professional liability insurance
- Commercial property coverage
- Workers Compensation
- Commercial auto insurance
- Cyber insurance
- Umbrella Insurance
Insureon also provides certificates of insurance to verify you have active coverage in place. This documentation is often required from clients and vendors.
What Factors Affect General Liability Insurance Rates?
Several factors can influence general liability insurance rates. Here are some key considerations:
Business Industry and Risk Profile:
Specific industries are inherently riskier than others. The nature of your business and the associated risks will impact insurance rates. For example, a construction business may face higher risks than a consulting firm.
Claims History:
Your business’s past insurance claims history plays a crucial role. If you have an account of frequent or high-cost claims, insurers may view your business as a higher risk, leading to increased premiums.
Coverage Limits and Deductibles:
The coverage limits you choose, and the deductibles you are willing to accept will impact your insurance rates. Higher coverage limits and lower deductibles generally result in higher premiums.
Type of Coverage Needed:
The specific type of coverage you require will affect rates. General liability insurance may be influenced by product liability, professional liability, or cyber liability coverage needs.
Credit History:
In some cases, business credit history can impact insurance rates. A positive credit history may result in more favorable rates.
Industry Trends and Market Conditions:
General trends in the insurance market and conditions within specific industries can impact rates. For instance, if there is an increase in liability claims industry-wide, it may lead to higher premiums.
Getting General Liability Insurance Without a License
The bottom line is you can purchase general liability insurance for your small business or side hustle without needing a formal business license.
Accurately describe your business activities when applying so the insurance provider can properly evaluate risk exposure. Be sure to disclose any high-risk activities that may require special underwriting.
Insurance carriers will happily issue a general liability policy to protect your company and personal assets if you have a legitimate business entity and disclose pertinent details.
Protecting your hard work with business insurance provides peace of mind. Don’t let licensing requirements slow you down – get the general liability insurance you need today!
