What Is General Liability Insurance?

General liability insurance covers customer claims of bodily injury, property damage and advertising injury (such as libel or copyright infringement) allegedly caused by your business. The coverage pays for legal defense costs and actual damages or settlements, not just perceived or claimed damages. It protects you during operations and after you complete work or sell products, so you're covered if problems emerge weeks or months later.

Understanding how general liability insurance works helps you make better coverage decisions and avoid overpaying. Explore these topics in order:

• How general liability insurance works
• What general liability insurance covers
• What it doesn't cover
• What is general liability insurance used for
• What to think about moving forward
• What you should do next

General liability insurance comes in two policy types: occurrence-based which is the most common (standard) and claims-based that is much rarer (often not an option). Each handles the timing of incidents and claims differently:

• Occurrence-based: Covers events that happen during your policy period, even if claims come later. If someone slips at your business in 2024 while you have coverage, you're protected even if they sue in 2027 after you've switched insurers or canceled the policy.
• Claims-based: Covers claims filed during the policy period for incidents that occurred after the retroactive date. You're covered for incidents whenever they happened, as long as you file while your general liability insurance is active.

Both policy types have limits that split into two numbers (Per occurrence and aggregate). The per-occurrence limit caps what you can get for a single incident. The aggregate limit caps your total coverage during the policy period (usually one year). Most coverage parts use the limits you choose for the main policy, but some, like medical payments coverage (MedPay) and product and completed operations coverage, are configured separately.

General liability insurance often has no deductible. But if your policy includes one (commonly for certain claims like third-party property damage), you’ll pay that amount out of pocket and your insurer covers the remaining eligible costs up to your policy limits.

Understanding how policies work helps, but knowing what's actually covered matters more. General liability insurance covers a defined set of third-party claims tied to your business operations. Coverage generally applies when your business is alleged to be legally responsible and can also include limited no-fault payments (like medical payments coverage) depending on the claim.

The table shows the most common claim types in a standard general liability policy and situations where coverage applies:

While general liability insurance handles many common business risks, it doesn't cover every type. Common exclusions include:

• Professional mistakes or bad advice, covered by professional liability insurance (errors and omissions insurance)
• Employee injuries or illnesses, handled through workers' compensation insurance
• Damage to your own property or equipment, covered under business property insurance
• Vehicle accidents, which require commercial auto insurance
• Intentional, fraudulent or illegal acts, which aren't insurable

General liability insurance is often paired with other policies to create a more complete protection bundle because of these exclusions.

Businesses use general liability insurance to protect against everyday risks that arise from interacting with customers, clients, vendors, and the public. It is commonly relied on to:

• Defend against lawsuits related to customer injuries or accidental property damage
• Meet insurance requirements in leases, contracts, and client agreements
• Cover claims that occur after work is completed or products are sold
• Protect cash flow from legal defense costs and settlements tied to normal operations

For many businesses, general liability insurance serves as the baseline coverage that supports day-to-day operations and contractual credibility.

General liability insurance is best viewed as foundational protection for third-party risks that arise from everyday business operations, not a complete insurance solution on its own. It is designed to respond when your business unintentionally causes injury, property damage, or certain advertising-related harm, but it leaves gaps for professional mistakes, employee injuries, property losses, and vehicle-related risks. 

With this in mind, the next step is not simply deciding whether to buy general liability insurance, but determining if it applies to your business, what limits are required, and which additional coverages may be needed to fully protect your operations.

Now that you understand what general liability insurance covers and how it works, you're ready to assess whether your business actually needs it. We recommend starting with getting answers to questions that help you determine if GL applies to your situation and what limits are required:

• Do You Need General Liability?
• Is General Liability Insurance Required For Me?