General Liability Insurance: What It Is And What It Covers

There are plenty of calamities that can put a serious dent in your bottom line. For instance, your employee might spill a can of paint on merchandise. A customer might get hurt after tripping on a rug in your store. Or you could be sued for causing reputational harm to another business due to something you or your employee said.

General liability insurance covers a small business for these types of problems (and more). It’s an essential coverage type for small business owners.

What Is General Liability Insurance?

General liability insurance is a type of small business insurance that covers your business for accidental injuries and property damage caused to others. It also covers other problems such as advertising injury, copyright infringement, and reputational harm.

These types of claims may result from your company’s products, services, or operations. Without general liability insurance, you could end up paying out of your business’s income and, in a worst-case scenario, even go bankrupt.

General liability insurance is sometimes called “business liability insurance” or “commercial general liability insurance.”

Other Types of Liability Insurance for Small Businesses

While general liability insurance is a core coverage type, it doesn’t cover everything. You may need additional types of liability insurance for your small business to cover gaps in coverage. Here are some common types of liability insurance to consider:

• Commercial auto insurance. The liability portion of commercial auto insurance covers accidental injuries and property damage caused to others while you or your employees are driving a work vehicle. Your personal car insurance policy won’t cover business use of a vehicle.
• Commercial umbrella insurance. This adds an extra layer of protection above the liability limits on your other insurance policies. For example, if a claim exceeds your general liability limits, commercial umbrella insurance can kick in to cover the remaining amount you have to pay to someone else.
• Cyber liability insurance. This covers a small business for a cyber breach, which could include sensitive information like your clients’ credit card numbers, driver’s license numbers, Social Security numbers or health records. Cyber liability insurance is also called cybersecurity insurance or cyber risk insurance.
• Professional liability insurance. This covers a small business for claims of mistakes in professional services, such as inaccurate advice, misrepresentation, negligence or violation of good faith and fair dealing. Professional liability insurance is also called errors and omissions insurance.
• Product liability insurance. If your small business creates, sells, manufactures or distributes a product, product liability insurance covers your business for injuries and property damage due to design defects, improper warnings, manufacturing defects or marketing defects.
• Workers compensation insurance. This covers medical bills and partial lost wages for employees who suffer job-related illness or injury. Workers compensation insurance also covers other expenses, such as disability benefits, death benefits and continuing care (like physical therapy).

What insurance do I need for my small business?

General liability insurance is a foundation for any small business insurance policy, but it’s only part of the solution for the multitude of problems that could financially impact your company. You’ll likely want to add more coverage types to cover other types of risks, such as fire, theft, vandalism and lost business income.

A good way to get started is with a business owners policy (BOP). It bundles general liability insurance along with commercial property insurance and business interruption insurance (also known as business income insurance).

You can also add other types of business insurance to meet your company’s needs. For example, if you use a vehicle for work purposes, you can add commercial auto insurance.

What Does General Liability Insurance Cover?

General liability insurance covers a business from a variety of possible claims, including bodily injury, property damage, copyright infringement, reputational harm and advertising injury.

• Bodily injury caused by a business is a common claim. For example, if someone comes to your place of business and is injured, a general liability policy would cover their medical costs. A bodily injury claim could be something as simple as a fall by a customer at a store or office.
• Property damage is another common liability claim. Your business may be legally responsible if a person’s property is damaged. Property damage claims could include damage to a client’s home or other property if you are visiting them on business.
• Copyright infringement claims come about if you are accused of using someone else’s work in your business ad or other business marketing without their permission.
• Reputational harm can happen, for example, if you’re being interviewed by a news outlet and you say something negative about another company that hurts their business.
• Advertising injury can happen if your business defames another person, business owner or company.

These types of liability claims are prevalent, so you’ll want to keep your business protected with the right insurance. For example, the average cost of a slip and fall claim is $20,000. And if you face a reputational harm lawsuit, you could be facing $50,000 in costs, according to The Hartford.

A good way to extend your business liability insurance is by purchasing a commercial umbrella insurance policy. This gives you an extra layer of protection from expensive lawsuits.

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What Does General Liability Insurance Not Cover?

General liability insurance covers a lot for a business, but it won’t cover business-related auto accidents, employee injuries and illnesses, damage to your business property, mistakes in professional services, claims that exceed your policy limit or illegal acts by you or your employees.

For these kinds of problems, you’ll need different types of business insurance, including:

• Employee injuries and illnesses. You need workers compensation insurance to provide coverage for employee injuries.
• Auto accidents. For auto accidents while doing business, a commercial auto insurance policy financially protects you if you own the vehicle. A hired or non-owned auto insurance covers a personal car or a rented car for work.
• Professional mistakes. An errors and omissions insurance (E&O;) policy provides coverage if you make mistakes in the course of your work. An E&O; policy is sometimes called professional liability insurance.
• Theft and damage to your business property. General liability insurance won’t cover your business equipment or property against theft or damage. You need a commercial property insurance policy to cover these types of problems.

Insurance won’t cover intentional acts, such as a computer you throw out the window. And general liability insurance won’t help if there are deliberate, illegal acts or wrongdoings by you or your employees.

Who Needs General Liability Insurance?

Here are situations where your business can benefit from business liability insurance:

• Your business is open to the public or clients or vendors.
• You advertise or create marketing materials for your business.
• You use social media personally or professionally.
• You use third-party locations for business activities.
• You need insurance coverage in order to be considered for work contracts.
• You have temporary employees.

What Types of Businesses Benefit from General Liability Insurance?

The types of businesses that typically buy general liability insurance include:

• Artisan contractors
• Consultants
• IT contractors
• Janitorial services
• Landscaping companies
• Marketing firms
• Real estate agents
• Small business owners

Is General Liability Insurance Required by Law?

Business liability insurance isn’t required by law, but if you fail to buy coverage, you’re leaving your business vulnerable to a wide variety of costs that could potentially bankrupt your business.

How Much General Liability Insurance Coverage Do I Need?

Most small businesses choose standard coverage amounts of $1 million per occurrence and a $2 million aggregate policy limit for their general liability insurance coverage, according to Insureon. This type of policy will pay up to $1 million to cover a single general liability insurance claim, with a $2 million limit for all claims during the policy period. The policy period is typically one year.

How Much Does General Liability Insurance Cost?

General liability insurance costs an average of $42 a month, according to Insureon. It might be less than that—29% of Insureon’s small business customers pay less than $30 per month for their general liability policies.

The cost of general liability insurance coverage varies based on the size of the business, your industry, your location and the amount of coverage you need.

You can manage general liability insurance costs by choosing the insurance limits that best meets your needs. A business owners policy is a convenient and cost-effective way to combine general liability insurance and business property insurance. But you also can buy general liability insurance all on its own.

How much you pay for general liability insurance depends on key factors such as:

• Your type of business. If your company is a high-risk business, you pay a higher cost for general liability insurance.
• The years of experience of your business
• Size, location and condition of your building
• Policy details, such as deductibles and coverage limits
• The insurance claims history for your business

The Risks of Not Having General Liability Insurance

Facing judgments, legal settlements and lawyer fees without the aid of general liability insurance can be very expensive and even bankrupt a business. Legal counsel can cost more than $100 an hour. Court costs may exceed $75,000 if the claim goes to court, and you may need to spend several thousand dollars even if a lawsuit is dropped, according to The Hartford.

Not having general liability insurance puts your business at financial risk. And you may lose clients because they won’t do business with you if you don’t have general liability insurance.

To prove that you have insurance coverage, you’ll need a certificate of insurance. This official document lists all the coverage types and limits on an insurance policy.

Related: Builder’s Risk Insurance: Definition, Coverage And Cost

General Liability Insurance Policy Limits

If you purchase general liability insurance, it’s important to be aware of two types of limits.

• Per-occurrence limit: This is the maximum amount that your insurance company will pay out for a single claim. If your per occurrence limit is $1 million, your insurance will cover up to that amount per incident.
• Aggregate limit: This is the maximum amount your insurance company will pay out for all the claims you file during your policy period. If your aggregate limit is $2 million, your insurance company will not pay you more than that amount regardless of the number of claims against you. Most general liability insurance policies have a term of one year, so the aggregate limit would apply for that period.

How to Get the Best General Liability Insurance

Gather Your Information and Documents

Before you start shopping for a general liability insurance policy, make sure you have all of the necessary information handy:

• Basic contact information.
• Information on what your business does.
• Number of employees and payroll.
• Details about your business location, including if you own or rent the building where your business is located.
• How long you have owned your business.
• Estimated business revenue for the upcoming year.

Consider a Business Owners Policy

A general liability insurance policy is foundational coverage for your small business, but it won’t cover problems like theft, vandalism, fire, severe weather and lost income. If you want coverage for these types of issues, you’re going to need to buy additional coverage.

A good way to do this is by purchasing BOP, which bundles general liability insurance with commercial property insurance and business interruption insurance. It’s typically cheaper to buy a BOP than to buy all three policies as standalone policies.

Compare General Liability Insurance Quotes

Whether you buy general liability insurance as a standalone policy or as part of a BOP, you’ll want to compare business insurance quotes from several insurance companies. That’s because insurers don’t price their policies the same.

You can get free business insurance quotes online or by speaking with an independent insurance agent.

General Liability Insurance Claim Examples

• Bodily injury claim. A customer browsing your store bumps into a shelf, causing a heavy object to fall and hit their foot, breaking their big toe. Your general liability insurance can cover the customer’s medical costs as well as any legal costs, judgments and settlements that arise out of the incident.
• Copyright infringement claim. You create business marketing material and someone claims you used their artwork without permission. General liability insurance can help cover the costs of a lawsuit, including your legal defense, judgments and settlements.
• Property damage claim. Your workers move a large appliance into a client’s home and in doing so, damage your client’s hardwood flooring and walls. Your general liability insurance can kick in to cover the damages.
• Reputational harm claim. While doing press to promote a big sales event at your business, you say something about another business, which results in a lawsuit for slander. General liability can help pay for your legal defense, judgments and settlements.

Who Are the Best General Liability Insurance Companies?

Forbes Advisor evaluated 28 companies that sell general liability insurance to find the best small business insurance companies.

• Acuity: Acuity offers general liability coverage, plus optional coverage such as employee benefits liability, waiver of subrogation for written contracts and damage to premises rented to you. It also provides additional professional liability coverage.
• Allianz: Allianz is best known for offering coverage to large global companies, but small businesses can get coverage for general liability insurance.
• Allstate: Allstate provides general business liability coverage. You can also add other types of liability coverage such as professional liability and employment practices liability coverage.
• Cincinnati Insurance: In addition to offering general liability coverage, Cincinnati Insurance has a host of options that businesses can select, ranging from liquor liability coverage to product recall coverage.
• Chubb: Chubb’s general business liability coverage offerings include its Customarq General Liability Insurance, which offers both premises and operations liability and products and completed operations liability.
• Clear Blue Insurance: Clear Blue Insurance offers coverage through partner agencies, rather than selling directly to small businesses. Available coverage types include all the essentials such as general liability, inland marine, commercial property and employment practices insurance.
• CNA: CNA offers general liability insurance coverage for a range of businesses, including CNA Connect for smaller companies and CNA Paramount for mid-sized companies.
• Farmers: Farmers provides general liability insurance for your business to help with injuries, lawsuits, data breaches and even disgruntled employees.
• Frankenmuth Insurance: Frankenmuth offers general liability coverage, though it typically targets mid-size and large-size businesses. The company tailors its coverage to five types of industries: contractors, manufacturers, offices and professional services, real estate, and wholesalers and distributors.
• Travelers: A Travelers general business liability policy is one of many types of policies offered by the company, which also provides commercial auto, commercial umbrella insurance, professional insurance and workers compensation for small businesses.
• Westfield Insurance: Westfield Insurance sells general liability coverage in 21 states and offers a Westfield Signature Series that bundles together coverage types that are specific to certain types of businesses, like contractors, hospitality, manufacturing and real estate.

Terms to Know When Shopping for Business Liability Insurance

• Business liability coverage: Another term for general liability insurance, which covers accidental injuries and property damage to others, copyright infringement, reputational harm and advertising injury.
• Business owners policy: Specific type of policy that packages together multiple coverages, including general liability coverage, business interruption insurance and business property insurance. You may also add other coverage types, such as workers compensation, professional liability, commercial auto and data breach insurance.
• Commercial umbrella insurance: An additional policy that kicks in when a claim exceeds the coverage amount of an underlying policy. For example, if a claim exceeds your general liability limit, your commercial umbrella insurance can cover the difference.
• Employment practices liability insurance: This policy covers settlements for claims that your business wrongfully terminated an employee or violated their rights. Employment practices liability insurance also covers your legal costs for these claims.
• Exclusions: This is a restriction on your policy that limits or fully excludes coverage for specific events, locations, people or property. For example, a general liability insurance policy excludes coverage for employees who are injured on the job (that’s covered by workers comp).
• General liability classification code: A code based on your industry that helps an insurer determine your business’ risk level.
• Medical payments insurance: This covers medical expenses when your company is responsible for injuries to someone else (not including your employees)
• Personal and advertising injury liability: This covers claims such as an employee speaking or publishing inaccurate information that libels or slanders an organization or person. It also covers claims that published material infringes on a copyright, results in a wrongful eviction or violates a person’s right of privacy.
• Property damage insurance: This covers accidental damage to someone else’s property. For example, if your employee damages someone’s home while working at a jobsite.
• Subrogation: Your insurance company might try to recoup money it paid on a claim from the insurance company of the party that was responsible for the injuries or damage.

Business Liability Insurance FAQ