General liability insurance is a business insurance product that helps to cover costs such as medical bills, property repairs, and legal expenses if your business is held liable for a covered reason. This can range from causing someone else to experience a physical or reputational loss to a bodily injury to property damage or advertising injury.
Nearly all businesses should be interested in general liability insurance. It’s not required by law—but commercial general liability insurance may be necessary to bid for construction work, obtain a professional license, or secure a commercial lease. You may also find that it’s necessary to comply with the stipulations of a particular client’s contract.
What is general liability insurance?
General liability insurance is a type of commercial insurance that protects your business from financial setbacks if you’re held liable for a loss experienced by someone else. It’s legally optional, but general liability insurance provides foundational coverage for some of the most common risks facing small business owners. It’s recommended for all businesses as a result.
What does general liability insurance cover?
Commercial general liability insurance can typically help pay to restore others after they experience some kind of loss for which you’re at fault. It can also take care of legal costs if you’re sued over a covered claim.
Bodily injury claims
General liability insurance includes bodily injury coverage to take care of medical expenses for others if your company is held liable for their injuries. This typically applies if a guest gets hurt on the premises of your business. For example, your policy may activate for a customer who breaks their wrist after slipping on a wet spot because you failed to put up a wet floor sign.
Property damage claims
Your general liability policy also includes property damage coverage that can help pay to repair or replace someone else’s property if you are responsible for damaging or destroying it. This coverage is especially helpful for contractors and other tradespeople who work in people’s homes, since they may have more access to—and therefore a greater chance of damaging—others’ property.
Personal and advertising injury
A standard general liability insurance policy includes personal and advertising injury coverage. This protects you in case you’re accused of causing certain types of nonphysical harm to other businesses or people. Think libel, slander, and copyright or trademark infringement.
Legal defense costs
If you face a lawsuit due to a covered claim, your general liability insurance may cover various kinds of legal expenses, including the following:
- Lawyer fees
- Filing fees and other court costs
- Expenses related to investigating claims
- Mediation or arbitration fees
- Settlements
- Court-ordered damages
Additional coverage options
Some other types of claims may be covered by your general liability insurance, depending on your insurance company. Here are examples of extra coverage options that may be included in certain general liability policies:
- Products-completed operations: Many general liability insurance policies include product liability coverage that can take care of someone’s medical treatments if they’re harmed by a product your business sells. It applies to bodily injury and property damage claims off your premises.
- Product recall: You may be able to add coverage for costs associated with notifying customers and getting rid of defective products in the event of a government-mandated recall.
- Contractual liability: General liability coverage may also pay legal defense costs or damages for contractual liability claims—or certain types of claims you assume legal liability for by signing a contract.
- Electronic data liability: A general liability insurance policy may include coverage in case you’re responsible for causing someone to lose digitally stored information. This coverage may only be included for relevant professions, such as IT consultants and other technology firms.
- Supplemental payments: Some insurers may cover additional expenses related to your claim, such as reimbursement for lost revenue while you miss work to participate in investigation proceedings or interest on damages a judge orders you to pay.
What general liability insurance doesn’t cover
General liability insurance excludes coverage for the following losses:
- Car accidents involving commercial vehicles
- Employee injuries and illnesses
- Damage to or theft of your business-owned property
- Lawsuits stemming from professional mistakes
- Data breaches
Businesses often purchase additional insurance policies to make sure they’re covered for the above scenarios.
Is general liability insurance required?
You aren’t required by law to carry general liability insurance, but there are situations where someone else will likely want to know that you’re covered, such as these:
- Obtaining a professional license or certification
- Securing a contract with a prospective client or partner
- Proving financial responsibility in order to lease commercial property
Who needs general liability insurance?
Given the broad coverage general liability insurance provides, practically every business owner could benefit from purchasing it. That said, it may be especially important for businesses with the following characteristics:
- Face-to-face interactions with clients
- Frequent access to customers’ homes or belongings
- Use of marketing or advertising in regular business operations
- Use of property owned by others to conduct commercial activities
- Need for a certificate of liability insurance to bid for contract work
Here are examples of industries that commonly benefit from general liability insurance coverage:
- Architecture
- Engineering
- Photography
- Hairdressing
- Fitness
- Interior design
- Landscaping
- Technology
- Real estate
- Consulting
- Marketing
- Janitorial services
- Food and beverage
- Plumbing
How much does general liability insurance cost?
On average, commercial general liability insurance costs between $500 and $1,200 per year. General liability insurance cost factors that may influence your premiums include the following:
- Policy details, including the coverage limits you select
- Claims history
- Risk level associated with your industry
- Size and scope of your business operations, including your annual revenue
- Location
- Whether you qualify for any discounts, such as a loss mitigation or preferred payment discount
Common general liability insurance coverage limits
As you shop for general liability coverage, remember that these policies typically come with two types of coverage limits:
- Per-occurrence limit (the maximum amount of money available for any one claim)
- Aggregate limit (the total amount your insurance carrier may pay out across all claims over the course of the policy’s coverage period)
Many small businesses opt to buy a general liability insurance policy that provides $1 million worth of coverage per occurrence and $2 million worth of coverage in aggregate. But you may decide on higher or lower coverage limits, depending on factors like your liability exposure and the value of the assets you could lose.
General liability insurance vs. business owners policy (BOP)
A business owners policy is a commercial insurance bundle exclusively offered to small and midsize businesses that combines basic property and liability coverages together—often at a discounted rate. General liability insurance is automatically included in a standard BOP, but it doesn’t provide the same level of coverage on its own.
How much general liability insurance does a small business need?
How much general liability insurance you need depends heavily on your industry.
For example, if you run a business that has a large amount of foot traffic—like a retail store—you may need higher general liability coverage limits to account for the increased risk of customer injury claims. Conversely, you may not need as much coverage if you run an e-commerce store with minimal direct interactions with customers or other partners.
General liability insurance at a glance
- Definition: General liability insurance is a business insurance policy that covers first-party legal fees and third-party repair or medical costs if your business is held liable for causing some type of harm to another person or entity.
- Coverage: Your general liability insurance may step in if you are accused of inflicting bodily injury, property damage, or personal and advertising injury on someone else. Certain policies may also cover other situations, such as electronic data liability or product recall claims.
- Exclusions: GLI doesn’t include coverage for things like damage to your property, commercial vehicle accidents, professional mistakes, cybercrimes, and workplace accidents.
- Recommendations: Because it covers some of the most common risks facing many business owners, general liability insurance is recommended for any company.
- Requirements: Although it is broadly recommended, general liability insurance is not required by law. But it may still be required if you want to obtain a professional license, lease property, or meet the conditions of a client contract.
- Cost: Average general liability insurance premiums typically range from $500 to $1,200 per year. Your premiums may vary based on factors like your location, industry, claims history, and annual revenue.
- Limits: A general liability insurance policy may include two separate coverage limits: one for each individual claim and one for the coverage period as a whole. Most small businesses are recommended at least $1 million worth of coverage per occurrence and $2 million worth of coverage in aggregate.
- Bundle: Small and medium-sized businesses can bundle general liability insurance with commercial property and business interruption insurance at an affordable rate by purchasing a business owners policy (BOP).
How to choose the right general liability policy
To get an appropriate amount of general liability insurance coverage at the lowest possible rate, shop around and compare quotes from multiple insurance providers. Make sure you have the following information at the ready as you request business insurance quotes:
- Name and address of your company
- Year your business opened
- Number of employees and locations
- Record of liability-related losses from the past three years
- How much coverage you want
The takeaway
Virtually every business owner should consider general liability insurance. It can save you from crippling expenses related to your customers—from bodily injury to property damage to even libel. It’s not required by law, but those who have companies that are more physical by nature (think a construction business versus a software company) may need it anyway to carry out business.
Frequently asked questions
Can I get general liability insurance if I operate from home?
Yes, general liability insurance is available for home-based businesses and can help protect against third-party bodily injury, property damage, and advertising injury claims.
What is a certificate of insurance?
A certificate of insurance (COI) is a document that summarizes the details of your general liability or other business insurance policy, including coverage types, policy limits, and effective dates. Businesses often use a COI to provide proof of insurance to clients, landlords, vendors, or contracting agencies.
Are customer injuries covered by general liability insurance?
Yes, general liability insurance can cover medical and legal costs if a customer is injured on your business premises or because of your commercial operations.
Can a small business operate without general liability insurance?
Small businesses are not required by law to carry general liability insurance, but it’s still recommended because it can cover many of the most common risks facing small business owners, such as liability for a customer’s injury or damage to their property.
Does general liability insurance cover subcontractors?
Your general liability insurance may cover claims involving subcontractors, but this may vary, depending on your policy details and insurer. General contractors often require subcontractors to maintain their own general liability insurance so they won’t have to be covered under the general contractor’s policy.
