Key Takeaways

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General liability insurance covers property and bodily damage but doesn't cover professional mistakes or workplace issues.

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In most cases, you aren't required to have general liability insurance, but getting it’s a good idea to protect your business.

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Construction, retail, hospitality and manufacturing businesses benefit most from coverage due to customer interactions and liability risks.

What Does General Liability Insurance Cover?

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.

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.

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:

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    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.

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    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.

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    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.

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    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.

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    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.

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    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:

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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. 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. 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. 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.

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    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.

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    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.

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    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.

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    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?

How do I determine my general liability coverage limits?

Does general liability cover lawsuits?

What's the difference between coverage A, B and C in general liability insurance?

Do I need a certificate of insurance for general liability coverage?

What types of businesses should prioritize general liability insurance?

How much does general liability insurance cost for small businesses?

How do I compare general liability insurance quotes?

Can I buy general liability insurance online?

What other types of business insurance do I need besides general liability?

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About Mark Fitzpatrick


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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.


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