Given the complexities of running a business, you might end up forgetting or overlooking taking a few decisions every now and then. One crucial aspect that business owners often overlook is general liability insurance. This type of insurance provides coverage for third-party claims involving bodily injury, property damage, and other liabilities. 

Investopedia reports that around 20 percent of new businesses fail during their first two years of operation. Within the first five years, 45 percent of businesses end up failing. A lot of closures and failures result from a business’s inability to cover expenses due to various types of claims and liabilities. Had these businesses considered having general liability insurance, they might have, otherwise, survived. 

Not having general liability insurance can expose your business to various risks that could have serious financial and legal consequences. In this article, we will discuss six problems that may arise if your business doesn’t have general liability insurance.

1. Financial Ruin From Lawsuits

One of the most significant problems your business could face without general liability insurance is the potential financial ruin caused by lawsuits. If someone suffers injury or property damage on your premises or due to your products and services, they could file a lawsuit seeking compensation.

Legal defense costs alone can be exorbitant, and if the court rules against you, the financial burden could be devastating.  Forbes reports that legal costs may exceed $75,000 if such claims end up in court. According to Commodore Insurance Services, general liability insurance covers legal expenses and settlements providing a safety net that shields your business from financial losses.

2. Property Damage & Product Liability

Without general liability insurance, your business might be on the hook for property damage caused by your business operations or products. For instance, if a contractor damages a client’s property during a project or causes harm or damage, they could face a hefty bill. 

With general liability insurance, the costs associated with property damage and product liability claims are typically covered. That, in turn, ensures your business isn’t drained financially by unforeseen accidents.

3. Reputation Damage

A lawsuit, even if unfounded, can harm your business’s reputation. In the age of social media and online reviews, negative publicity can spread rapidly, tarnishing your brand’s image and credibility. 

Without general liability insurance, managing the fallout from reputation damage becomes much more challenging. Having insurance helps you financially and allows you to address the situation promptly and professionally, potentially mitigating the negative impact on your reputation.

4. Contractual Requirements

Many businesses are required to have general liability insurance by their clients or partners as part of their contractual agreements. If you don’t meet these requirements, you could lose out on valuable contracts or partnerships.

Whether you’re a contractor, consultant, or service provider, failing to have the necessary insurance could put your business at a competitive disadvantage. General liability insurance ensures that you meet contractual obligations, enabling you to pursue and maintain important business relationships.

5. Medical Expenses & Bodily Injury Claims

Accidents resulting in bodily injury can happen even in the safest of environments. If a customer or visitor sustains an injury on your premises, you could be liable for their medical expenses and other associated costs. 

Without general liability insurance, these expenses would come directly out of your business’s pocket. This could put a strain on your finances and hinder your business’s ability to operate smoothly. With insurance coverage, medical expenses and bodily injury claims are typically taken care of, allowing you to focus on running your business.

6. Legal Compliance & Penalties

Having general liability insurance is mandatory in most US states. Operating without such insurance can cause you and your business a lot of legal trouble.

Government regulations vary, but it’s crucial to understand the insurance requirements in your industry and region. Ignoring these requirements not only puts you at risk of financial repercussions but also demonstrates a lack of commitment to legal compliance. As a result, you will have to eventually pay penalties to your local government for failing to commit to its legal requirements. 


According to Insurance Business Magazine, the average cost of general liability insurance businesses ranges from $480 to $660 per year. The costs vary depending on the size of the business and the industry it operates within. Whatever the costs may be, it’s hard to argue in favor of not having such kind of insurance for your business.

Therefore, it’s vital that you get in touch with an insurance company and secure your general liability insurance if you haven’t already. Failure to do so will lead to a variety of consequences, some of which are discussed above.