What Is General Liability Insurance Coverage?
General liability insurance, also known as commercial general liability, is a type of small business insurance that can help protect businesses from claims of:
- Bodily injuries
- Property damage
- Personal injury, like libel or slander
- Advertising injury
- Copyright infringement
- Reputational harm
General liability insurance also helps financially protect your business if you’re sued. Your GLI policy can help pay for your legal fees and settlement costs.
Withoutgeneral liability insurance coverage, your business would have to pay out of pocket for costly claims that could come up during normal business operations.
What Does a General Liability Insurance Cover?
A general liability policy helps cover claims that can come up during normal business operations, such as:
Bodily Injury
General liability coverage can help pay for medical expenses associated with a bodily injury that your business may have caused, like a customer slip and fall.
Property Damage
If an employee accident causes property damage, like breaking a client’s windows while working at their home, general liability insurance can help. This coverage can help cover the repair or replacement costs to fix the windows.
Personal Injury
General liability can help pay for your business’ defense costs if you’re sued for personal injury that isn’t physical, like libel or slander.
General Liability Coverage Examples
Examples of general liability insurance coverages include:
- Product liabilitycoveragecan help protect your business from claims that a product you made or sold caused bodily injury or property damage to someone else’s belongings.1We offerproduct liability insuranceas a part of your general liability insurance policy.
- Product recall insurancehelps you manage a product recall and protects you from the financial impacts.Product recall insuranceis an endorsem*nt you can add on to your business insurance policy.
- Contractual liability coveragecan be added on to your general liability insurance policy.Contractual liability insurancecoverage helps cover claims related to contract issues.
What Costs Does General Liability Insurance Cover?
What is general liability insuranceand what does it cover? General liability insurance, also known as commercial general liability insurance orbusiness liability insurance, helps cover:
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Costs for property damage claims against your business
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Medical expenses if a customer gets injured at your business
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Administrative costs to handle covered claims
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Court costs, judgments and settlements for covered claims
Your general liability insurance can help pay for claims up to your coverage limits, or your general aggregate. Yourgeneral aggregate for insurance, sometimes called the “aggregate limit of liability,” is the maximum amount of money your insurance company will pay out for claims during a policy period. So, if you have a $1 million aggregate limit on your general liability insurance policy, your insurance will pay for claims up the maximum amount of $1 million during the policy term.
How Much Coverage Does a Typical General Liability Insurance Policy Provide?
Your general liability insurance can help pay for claims up to your coverage limits, sometimes referred to as your per-occurrence limit and your general aggregate limit.
- Per-occurrence limit is the maximum amount of money that an insurance company will pay for any one claim. For example, if you have a GLI policy with a $1 million per-occurrence limit and a $2 million general aggregate limit and you file a claim valued at $1.1 million, your insurance would pay the $1 million because of the occurrence and your business would likely pay the remaining $100,000. The remaining amount left in your policy period then decreases from $2 million to $1 million.
- General aggregate limit, sometimes called the “aggregate limit of liability,” is the maximum amount of money your insurance company will pay out for claims during a policy period. So, if you have a $1 million aggregate limit on your general liability insurance policy, your insurance will pay for claims up the maximum amount of $1 million during that specific policy term.
What Does General Liability Insurance Not Cover?
Be aware that general liability insurance doesn’t cover every kind of claim. For some, you’ll need different types of coverage to give your business more protection.
A general liability insurance policy won’t help your business with:
- Commercial auto accidentsthat you or your employees cause while driving for work. Acommercial auto insurancepolicy can help you cover the cost of damages. If your small business doesn’t have company-owned vehicles,hired and non-owned auto coveragecould help, too. Be aware that many states require certain types and amounts of auto coverage, like bodily injury liability coverage or property damage liability coverage.
- Employee injuries or illnessesdue to their work.Workers’ compensation insurancegives your employees benefits to help them recover from a work-related injury or illness. For example, it can help cover an employee’s medical bills and ongoing care expenses.
- Damage to your own business property. You’ll need to get acommercial property insurancepolicy to help protect your owned or rented building and business equipment.
- Mistakes or errors in the professional servicesgiven to customers.Professional liability insurancecan help cover your legal costs if a client sues you for a mistake in the services provided, such as bad advice given to a client or faulty workmanship.
- Claims that cost more than your liability limits.You’ll need acommercial umbrella insurance policy for expensive claims. This extends the limits of certain liability insurance policies.
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Illegal acts or wrongdoing that you or your employees did purposefully can result in your business being held legally responsible.
The Dangers of Not Having General Liability Insurance
State laws generally don’t require you to carry general liability insurance. However, not having coverage could put your business at financial risk.
Judgments, settlements, legal defense fees and court costs can also be extremely expensive. If someone files a claim against your business:
- You’ll need legal counsel, which can cost between $100 per hour to $500 per hour.2
- You may need to spend several thousands of dollars, even if the lawsuit gets dropped.
- When you add the cost of administrative work, legal secretaries and any settlements or judgments, your business could face a bill totaling hundreds of thousands of dollars. The right general liability insurance policy can help your business cover these costs.
You may also find that businesses will want to make sure you have the minimum coverage they require before agreeing to work with you. They want to make sure your business can survive a liability claim and continue to do what they hired you to do. So they may ask you to provide proof of insurance, known as acertificate of liability insurance.
