General liability insurance gives your business financial protection against third-party claims that involve bodily injury, property damage and personal/advertising injury, but it doesn't cover every business risk. Understanding what it covers versus what requires separate policies helps you build comprehensive financial protection for your business.
What Is General Liability Insurance?
Updated: June 25, 2025
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Key Takeaways
General liability insurance covers property and bodily damage but doesn't cover professional mistakes or workplace issues.
In most cases, you aren't required to have general liability insurance, but getting it’s a good idea to protect your business.
Construction, retail, hospitality and manufacturing businesses benefit most from coverage due to customer interactions and liability risks.
What Does General Liability Insurance Cover?
Potential Claim | Is It Covered? | Business Example |
|---|---|---|
Customer injuries on your property | Yes | A customer slips on a wet patch on your floor and breaks their wrist. Your policy covers their $8,000 emergency room bill and any legal fees if they sue. |
Property damage from your business operations | Yes | Your contractor accidentally cuts through a gas line, causing $25,000 in damage to a client's building. General liability covers the repair costs. |
Copyright or trademark infringement claims | Yes | You use a stock photo in your ad campaign without proper licensing. The photographer sues for $15,000. Your policy covers defense costs and settlement. |
Defective products causing customer losses | Yes | Your candle-making business sells a defective candle that tips over and causes a house fire, resulting in $50,000 in damage. Coverage A handles the claim. |
Professional mistakes or negligence | No | Your marketing consultant's campaign strategy flops, costing a client $75,000 in lost revenue. General liability excludes professional services, so you need professional liability insurance. |
Workplace discrimination or harassment | No | An employee sues your company for $100,000, claiming age discrimination during layoffs. These employment-related claims fall outside general liability coverage and require employment practices liability insurance (EPLI). |
Employee injuries at work | No | General liability excludes workplace injuries to your employees. If your warehouse employee injures his back lifting heavy boxes and needs surgery costing $35,000, workers' compensation insurance will cover this and lost wages. |
Vehicle accidents during business activities | No | Your driver rear-ends another car while delivering office supplies to a client, causing $20,000 in damage. General liability excludes vehicle accidents, but commercial auto insurance covers it. |
Data breaches or cyber attacks | No | Hackers steal 5,000 customer credit card numbers from your online store. General liability excludes cyber incidents, but cyber liability insurance handles notification costs and legal fees. |
General Liability Coverage Types and Terms
Your general liability policy becomes clearer when you understand the three main coverages and how your limits work. These protect your business and how much you're covered for:
Coverage A (bodily injury and property damage liability)
This coverage protects your business when you're legally responsible for physical injuries to others or damage to someone else's property. For example, if a customer slips at your store and gets hurt, this coverage pays their medical bills and legal fees.
Coverage B (personal and advertising injury)
It addresses reputational harm and intellectual property violations, such as libel and slander claims, when someone accuses your business of making false statements about someone. It also covers copyright and trademark infringement, like using a photographer's image in your ads without permission.
Coverage C (medical payments)
It pays for third-party medical expenses regardless of who's at fault. Coverage C immediately pays for the emergency room bill if a customer trips to your store and sprains his ankle, preventing minor incidents from becoming expensive lawsuits.
Per-occurrence limits (the most your policy pays for one incident)
This is the maximum amount your insurer will pay for a single claim. When you see $1 million/$2 million on your policy, that first number ($1 million) is your main per-occurrence limit, though some coverage sections have their own limits. So if a customer sues for $1.2 million under Coverage A (bodily injury), your policy covers $1 million and you pay the remaining $200,000.
Aggregate limits (your total coverage for the year)
This caps how much your policy pays for all claims combined during your policy year. Your aggregate limit is the second number in $1million/$2 million ($2 million). Once your insurer pays out $2 million across all your claims, your coverage is exhausted until you renew.
Deductibles
Some general liability policies have deductibles you pay before coverage kicks in, though many policies have $0 deductibles. You pay the deductible on the entire claim, not individual coverage sections. For example, if you have a $1,000 deductible and face a $15,000 lawsuit under Coverage A, you pay the first $1,000 and your insurer covers the remaining $14,000.
How Much General Liability Coverage Do You Need?
Choosing the right general liability coverage is overwhelming when you're balancing financial protection needs with budget constraints.
Businesses that interact with customers, work on client property or sell products face liability risks that could result in expensive lawsuits. Even home-based businesses aren't safe since clients could get injured during meetings at your house. Many clients, landlords and lenders also require proof of coverage before they work with you or approve loans.
Three key factors help you choose the right coverage amount for your business are:
What Does General Liability Insurance Cover?
General liability insurance protects your business against third-party claims involving bodily injury, property damage and personal or advertising injury, but it doesn't cover every business risk. Understanding what it covers versus what requires separate policies helps you build comprehensive financial protection for your business.
- 1
Industry risk
Construction companies need at least $2 million per occurrence because of dangerous equipment and job site hazards. Professional services like consulting need less coverage due to lower physical risk exposure.
- 2
Business size
More employees and customers mean more chances for accidents. A retail chain with hundreds of daily customers needs higher limits than a small consulting firm with only a few client meetings per week.
- 3
Asset protection
Choose coverage that matches what you own. If your manufacturing business has $3 million in equipment and property, carry at least $3 million in liability coverage so lawsuits can't wipe out everything you've built.
Who Needs General Liability Insurance?
Although not legally required, all businesses should have some level of general liability insurance. However, specific industries benefit more than others.
If you're in construction or contracting, you face elevated risks and often need coverage for licensing requirements. Many states require general liability insurance for contractors and general contractors require subcontractors to provide certificates of insurance before starting work.
Professional services like consulting, accounting and legal services have lower bodily injury risk but need financial protection against advertising injury claims. Many professional licensing boards and client contracts require proof of coverage.
Retail and hospitality businesses face frequent customer interactions and slip-and-fall risks. Landlords often require general liability insurance in lease agreements, and many retail platforms require coverage before allowing online sales.
Manufacturing companies need substantial coverage due to product liability exposure and completed operations risks. They often require higher limits than standard policies provide.
Commercial General Liability Insurance: The Bottom Line?
General liability coverage protects your business from expensive third-party claims involving property damage, bodily injury and reputational harm. While not legally required, most businesses need it to handle customer interactions safely and meet client contract requirements. Construction, retail and manufacturing companies face the highest risks and would benefit most from this coverage.
Commercial General Liability Insurance: FAQ
What kind of financial protection does general liability insurance provide?
General liability insurance covers three things: if someone gets hurt at your business, if you accidentally damage someone's property and if someone claims you hurt their reputation. Think slip-and-fall accidents, property damage during a job or accusations of copyright infringement in your ads.
How do I determine my general liability coverage limits?
Most small businesses need $1 million per occurrence with $2 million aggregate limits. Some, like construction companies, need higher coverage due to increased risks. When selecting limits, match coverage to your business assets and evaluate industry risks and client contract requirements.
Does general liability cover lawsuits?
Yes, general liability covers legal defense fees, court costs and settlements up to policy limits. Your policy covers judgment amounts, protecting business assets from expensive claims. Understanding the commercial insurance claims process helps you know what to expect when filing.
What's the difference between coverage A, B and C in general liability insurance?
Coverage A is for bodily injury and property damage liability. Coverage B is for personal and advertising injuries like libel and copyright infringement. Coverage C covers medical payments for injuries on your property regardless of fault. Each has separate limits for comprehensive financial protection.
Do I need a certificate of insurance for general liability coverage?
Yes, most clients and landlords require a certificate of insurance (COI) proving active general liability coverage. Construction firms and corporations demand this proof to protect themselves. COIs are available immediately after purchasing coverage at no extra cost.
What types of businesses should prioritize general liability insurance?
Construction and contracting businesses face the highest risks and need higher coverage for licensing. Retail and hospitality need slip-and-fall protection. Professional services need advertising injury coverage. Any company that has customer interactions or physical locations should carry it.
How much does general liability insurance cost for small businesses?
Your general liability insurance cost depends on your industry (restaurants pay more than consultants), business size, location and how much coverage you choose. Most small businesses pay between a couple hundred to several thousands of dollars annually.
How do I compare general liability insurance quotes?
Compare coverage limits, not just price, because cheaper policies may leave you underinsured. Ask about deductibles, exclusions and discounts. Ensure the policy covers your actual business operations. Finding cheap general liability insurance is possible if budget is a concern.
Can I buy general liability insurance online?
Yes, it’s possible to get business insurance online. Many insurers offer instant online quotes and coverage. Provide basic business information like industry type, employees and revenue. For straightforward businesses, coverage begins immediately after payment with an instant certificate of insurance access.
What other types of business insurance do I need besides general liability?
Beyond general liability, consider professional liability insurance for service errors and commercial property insurance for your equipment and inventory. It's also worth investing in workers' compensation if you have employees. These types of business insurance work together to fill coverage gaps.
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About Mark Fitzpatrick
Mark Fitzpatrick, a Licensed Property and Casualty Insurance Producer, is MoneyGeek's resident Personal Finance Expert. With over five years of experience analyzing the insurance market, he conducts original research and creates tailored content for all types of buyers. His insights have been featured in publications like CNBC, NBC News and Mashable.
Fitzpatrick holds a master’s degree in economics and international relations from Johns Hopkins University and a bachelor’s degree from Boston College. He's also a five-time Jeopardy champion!
Passionate about economics and insurance, he aims to promote transparency in financial topics and empower others to make confident money decisions.