General liability insurance covers claims that your business caused bodily injury or property damage to someone else, plus certain claims like libel or slander. It pays for legal defense, settlements and judgments up to your policy limits. It does not cover your own employees, your own property, your vehicles or mistakes in professional advice.
What general liability insurance is
General liability insurance, often called commercial general liability or CGL, is the foundation policy most small businesses buy first. It protects you when a customer, vendor, visitor or other third party says your business operations hurt them or damaged their property.
Landlords, clients and general contractors frequently ask for proof of this coverage before you can sign a lease or start a job. That proof usually comes as a certificate of insurance.
Read also: How to Get a Certificate of Insurance (COI) for Your Business
What general liability insurance covers
Most standard policies are built around a few core coverage areas. The exact wording depends on your insurer, so always read your own policy form.
Third-party bodily injury
If a customer slips on a wet floor in your shop, or a client trips over your equipment during a site visit, general liability can pay for their medical bills and for your defense if they sue.
Third-party property damage
If your crew damages a client’s flooring while installing cabinets, or you accidentally break something at a customer’s home, the policy can pay to repair or replace it.
Personal and advertising injury
This part covers non-physical harm such as libel, slander, false arrest claims or using someone else’s advertising idea in your own marketing. For businesses that publish ads, social posts or reviews, this matters more than many owners think.
Products and completed operations
If a product you sell or work you completed later causes injury or damage, this coverage can respond even after the job is finished. Contractors and product sellers rely on it heavily.
Legal defense costs
Defending a lawsuit is expensive even when you did nothing wrong. Most general liability policies pay defense costs in addition to settlements, and many pay defense outside the limit, though this varies by policy.
What general liability insurance does not cover
Knowing the exclusions is just as important as knowing the coverage. These are the most common gaps:
- Injuries to your own employees, which fall under workers’ compensation insurance.
- Damage to your own building, equipment or inventory, which needs commercial property insurance.
- Vehicles used for business, which require commercial auto insurance.
- Errors, omissions or bad advice in professional services, which need professional liability (E&O) insurance.
- Data breaches and cyberattacks, which are handled by cyber liability insurance.
- Intentional or criminal acts.
How policy limits work
General liability policies usually show two limits. The per-occurrence limit is the most the insurer will pay for a single incident. The aggregate limit is the most it will pay for all claims during the policy period.
A common structure is $1 million per occurrence and $2 million aggregate, and many contracts ask for at least that. If your contracts require higher limits, an umbrella or excess liability policy can sit on top of your general liability.
Your deductible, if any, also affects what you pay out of pocket when a claim happens.
Read also: Insurance Premium vs Deductible: What’s the Real Cost to You?
Who needs general liability insurance
Almost any business that deals with the public, visits client sites or sells products should consider it. That includes:
- Contractors, cleaners, landscapers and other trades.
- Retail stores, cafés and restaurants.
- Consultants and freelancers who meet clients in person.
- Online sellers whose products could cause harm.
- Home-based businesses that receive customers or ship goods.
General liability is not always legally required by a state, but it is very often required by contracts, leases and licensing boards. Forming an LLC does not replace it: an LLC can shield personal assets in many situations, but the business itself can still be sued.
Read also: Does an LLC Need Insurance? What LLC Owners Should Know
General liability vs a business owner’s policy (BOP)
A business owner’s policy bundles general liability with commercial property insurance, often at a better combined rate than buying both separately. Small businesses with a physical location, equipment or inventory often find a BOP more practical.
If you work from home with little equipment, a standalone general liability policy may be enough. If you have a storefront, a BOP is usually worth quoting.
Read also: Does Homeowners Insurance Cover a Home-Based Business?
What affects the cost of general liability insurance
Insurers price general liability based on risk. The main factors include:
- Your industry and the type of work you do.
- Your revenue and payroll.
- Your location and number of locations.
- Your claims history.
- The limits and deductible you choose.
A roofer and a bookkeeper will pay very different amounts because their risk of causing injury or property damage is very different. The best way to know your price is to compare quotes for the same limits.
Read also: How to Compare Insurance Quotes and Actually Save Money
How to file a general liability claim
If an incident happens, act quickly:
- Make sure anyone injured gets help first.
- Write down what happened, with dates, names and photos.
- Do not admit fault or promise payment at the scene.
- Notify your insurer or agent as soon as possible.
- Forward any letters, demands or lawsuit papers right away.
Late reporting is one of the most common reasons claims become complicated, so report even if you are unsure a claim will follow.
FAQ
Does general liability insurance cover employee injuries?
No. Injuries to your own employees are covered by workers’ compensation insurance, which most states require once you have employees.
Does general liability cover mistakes in my work?
It covers physical injury or property damage caused by your work, but not financial losses from errors or bad advice. Professional liability insurance covers those.
Is general liability insurance required by law?
Most states do not require it for every business, but clients, landlords and licensing authorities often do. Check your contracts and your state licensing rules.
Can I get general liability insurance for one job?
Some insurers offer short-term or per-project coverage, but most small businesses buy an annual policy because clients usually ask for continuous proof of coverage.
How fast can I get a certificate of insurance?
With many online insurers, you can download a certificate shortly after buying a policy. Traditional agents may take a little longer.
