General Liability Insurance for Limited Partnerships: What to Know
Did you know that 4 out of 10 businesses are likely to experience a claim at some point in the next 10 years? That means it can be imperative to put in place protections that can help shield them from liabilities.
There are many different types of liability. It can be difficult to know which types of coverage can provide the protection you might need.
General liability insurance is a specific type of coverage. It helps to cover certain situations a limited partnership or other businesses might face.
This article explains what general liability insurance can cover and what it does not. It also describes the unique advantages it can offer to limited partnerships. This information can help you determine if it is the right choice for your business.
What is General Liability Insurance?
General liability insurance is one of the most common types of coverages that businesses purchase. In fact, it is sometimes called "commercial general liability" or "small business liability insurance."
It can help cover three types of incidents. The first is when someone other than an employee gets injured on your business property. It can also protect you in situations where someone else's property becomes damaged when interacting with your business.
A third category is where someone alleges harm other than physical. This can include their reputation or certain financial transactions.
Is General Liability Insurance Required?
States have different insurance requirements. While some require certain businesses to carry general liability insurance, others do not. It can be important to know the law where your business operates.
Even if it is not required by law, general liability insurance can be a good idea, and there are some business practices that may demand you carry it. For instance, it may be necessary before obtaining certain licenses. Landlords may want to see proof before renting a commercial space.
Other businesses may demand it before entering into a contract. This is to help protect themselves from inadvertent exposure to lawsuits.
You can get general liability insurance with other policies. For instance, you can obtain liability and property coverage in a Business Owners Policy (BOP) coverage. A BOP from PolicySweet also includes cyber-risk coverage to help protect your business from the impacts of cyber-attacks.
How Do You Know If You Need General Liability Insurance?
There are a few conditions to consider when determining if your business should obtain general liability insurance. First, if you interact with customers at your place of business, there is a chance that they could become injured.
This includes businesses from restaurants to retail shops. If you serve customers and one is physically injured, you could be sued.
General liability also can protect you against other types of alleged harm. This could include libel and slander.
Companies or individuals can claim advertising injuries. These often pertain to marketing endeavors that they allege harm their business.
If you advertise your business to the public, there is a chance that you could face lawsuits. These include copyright and trademark violations. Again, general liability insurance can help protect against such claims.
Finally, if you have access to customers' property, you could be at risk of damaging it. Typical businesses like cleaning companies, artisan contractors, landscapers, and other businesses might want to consider general liability coverage. It can help protect you from lawsuits related to damaging the property of a third-party.
What is a Limited Partnership?
There are three main types of business partnerships. Understanding the differences can help you see how general liability insurance can come into play for yours.
Note that these are distinct from limited liability companies (LLCs). This is a business that is a completely separate entity from its owners, who might not be liable for debts or lawsuit outcomes.
General Partnership
A general partnership (GP) is when the partners share in the profits and responsibilities of the business. This can include debts and liability related to lawsuits. Each also has a responsibility to act in the best interest of their partners.
General partnership liability can extend to every partner. They may have the same responsibilities and risks as other partners.
Limited Liability Partnership
A limited liability partnership (LLP) is the next type of business. As the name suggests, this is where the partners have only a limited level of liability.
Like a general partnership, each one is involved in the management activities of the business. "Limited liability" means that each partner might not be liable for negligence or misconduct of other partners or the business. Common LLP businesses include accounting and law firms, or other professional services.
Limited Partnership
Many people confuse a limited partnership (LP) with a limited liability partnership. The two are distinct business arrangements with different implications for exposure to lawsuits.
Like a GP and LLP, there are many partners that have an interest in the company. With an LP, at least one of the partners takes on the responsibilities of "general partner."
This means he or she manages the business and makes financial decisions. While the general manager can ask for advice from other LP members, they are ultimately responsible for the direction of the company.
For this reason, the general partner has unlimited liability for debt or lawsuits. The other partners only have limited liability.
How General Liability Insurance Helps to Protect a Limited Partnership
As mentioned, in exchange for giving up management power, partners in LPs might have protection from personal liability. Their personal assets can be safe from financial or legal claims made against the LP.
The general partner has exposure. That is because he or she is solely responsible for the management of the business.
This makes them susceptible to liability claims made against the LP. In short, general liability insurance could help protect the business and the general partner from such claims.
What General Liability Insurance Does Not Cover
There are several specific circumstances that general liability insurance might not cover. The biggest one is employee injuries or automobile accidents. For these, you should consider Worker's Compensation, commercial auto, or other types of policies.
In most locations, it may not cover punitive damages (though there are exceptions). These are verdicts designed to punish a company for egregious or intentional wrongdoing. If you believe there is a unique threat of this to your business, a qualified insurance agent can help you find the right policy.
Finally, general liability insurance does not cover individuals from intentional wrongdoing or mistakes. These include things like sexual harassment or personal injury caused by one of your partners or an employee breaking the law.
How Much Does General Liability Cost?
Premiums for general liability insurance can vary. What you pay largely depends on two factors: the number of individuals in your business that the policy helps to protect and the level of risk exposure. These are different for every company.
Some companies might have higher premiums than other types, due to their high level of risk. Businesses that need coverage for a large number of people could have higher premiums than smaller ones.
There are a number of elements that can influence the level of risk associated with your business such as where your business is located and your claims history among other things.
Get General Liability Insurance Coverage for Your Limited Partnership
Now that you understand how general liability insurance works, you can choose the coverage level that is right for your business. A qualified insurance provider can help you further hone your search. They also can answer questions you might have about specific policies for limited partnerships.
PolicySweet® specializes in providing coverage to small businesses. We have helped many businesses find the right policies for their operating needs. Reach out to us today to get a free quote.