General liability insurance coverage: A complete guide

What is commercial general liability insurance coverage?

Commercial general liability insurance covers businesses against third-party claims related to bodily injury, property damage and advertising injury. If your business gets sued, your general liability insurance policy will also cover your legal fees, court costs and any settlements or judgments, up to your policy limits and minus any deductible you may have.

Is general liability insurance required by law?

Although general liability insurance isn't mandatory for all businesses, there are instances when it may be required, including:

• Leasing commercial space
• Applying for a professional license or certification
• Signing a business contract

Who needs general liability insurance coverage?

Most businesses can benefit from having general liability insurance, but it’s especially important for those that interact with clients or customers in person or have access to clients’ property. Some business types that should consider general liability insurance coverage include:

• Retail store owners
• Hair stylists
• Lawyers
• Accountants
• Real estate agents
• Marketing firms
• Consultants
• Landscapers
• Architects

“Even if you think you’re unlikely to face a lawsuit, insurance is there to protect you, typically at an affordable cost – especially when compared to legal fees. General liability insurance is for everyone, not just big businesses. Everyone from independent consultants and contractors to tradespeople should have it,” Lea says.

What does general liability insurance cover?

A standard general liability insurance policy covers your business financially if you are sued for the following.

• Bodily injury: If a client or customer claims that your business was responsible for a physical injury they received, your general liability policy will cover their medical expenses and your legal fees.
• Property damage: This applies to third-party lawsuits related to property damage, such as a landscaper damaging a homeowner’s fence while trimming bushes.
• Advertising injury: Advertising injury lawsuits deal with reputational harm that your business caused to someone else. It often involves issues such as libel, slander, misrepresentation or copyright infringement.

What is not covered under general liability insurance?

General liability insurance covers many of the financial risks that small businesses face, but it doesn’t cover everything. For instance, it doesn’t cover:

• Damage to your office space
• Damage to business inventory or equipment
• Employee injuries or lawsuits
• Accidents in business-owned vehicles
• Lost income due to business interruption
• Professional mistakes or clerical errors

Which insurance companies offer general liability?

Most commercial insurers offer general liability business insurance. However, not all commercial insurance providers are the same. Before you select an insurer, it’s a good idea to evaluate the carrier based on factors like financial strength, customer satisfaction, and cost.

Here are just some of the companies that sell general liability insurance for business:

• Allstate
• Chubb
• The Hartford
• Progressive
• Nationwide
• State Farm
• Travelers

How much does general liability insurance cost?

The cost of general liability coverage insurance is different for every business. 

Some of the biggest factors that can affect the cost of general liability insurance include your business, its size, your workforce, your revenue, past insurance claims, your business's location, and your industry.

For example, a company in a high-risk industry such as construction will pay an average of $981 a year for general liability, while a professional services firm will pay $350, according to small business insurance broker Insureon.

Here's Insureon's deeper breakdown of cost by industry:

• The average price for a general liability policy for building design firms is $435 a year.
• The average price for a general liability policy for cleaning services is $580 a year.
• The average price for a general liability policy for construction companies is $981 a year.
• The average price for a general liability policy for food and beverage services is $525 a year.
• The average price for a general liability policy for healthcare companies is $376 a year.
• The average price for a general liability policy for IT/technology services is $363 a year.
• The average price for a general liability policy for landscaping companies is $610 a year.
• The average price for a general liability policy for media and advertising firms is $394 a year.
• The average price for a general liability policy for photo and video services is $350 a year.
• The average price for a general liability policy for professional services is $350 a year.
• The average price for a general liability policy for retail shops is $500 a year.
• The average price for a general liability policy for sports and fitness companies is $350 a year.
• The average price for a general liability policy for trucking companies is $606 a year.

And where your business is based also affects the price. Here's a look at Insureon's breakdown of cost by state:

• The average price for a general liability policy in California is $500 a year.
• The average price for a general liability policy in Texas is $500 a year.
• The average price for a general liability policy in Florida is $590 a year.
• The average price for a general liability policy in New York is $500 a year.
• The average price for a general liability policy in Pennsylvania is $502 a year.

General liability insurance premiums also depend on the insurance company that underwrites the policy. 

For example, the national average general liability insurance premium from Progressive is $80 per month. The average general liability premium from The Hartford, on the other hand, is $67 per month.

How does general liability insurance work?

General liability business insurance provides financial protection against third-party liability claims. If someone suffers a bodily injury, property damage or advertising injury, you can file a claim with the insurance company to get compensated for covered expenses.

For example, imagine you own a real estate business and a client visits your office to discuss selling their home. While walking to the bathroom, the client slips on a wet floor and falls on their wrist. The client’s wrist is broken.

In this situation, the insurance would pay for the client’s medical bill and cover a legal settlement or judgment. However, if the cost of the lawsuit exceeds your policy limits, you would have to pay the difference out of pocket.

Most general liability insurance policies have two coverage limits.

• Per-occurrence limit: This is the most money an insurance company will pay toward a single claim during the policy period.
• Aggregate limit: This is the maximum coverage amount for all claims filed within the policy period. The aggregate limit is usually a multiple of the amount of the per-occurrence limit.

When to consider buying general liability insurance

You should consider buying general liability insurance as soon as your business is operational. Nearly every business faces some financial risk related to customer injuries, property damage, or advertising injury. Third-party liability claims can have major financial consequences, and unexpected lawsuits can have a serious impact on your bottom line.

While general liability insurance is usually optional, it may be a requirement for some businesses. For example, if you want to lease a commercial office space, the landlord might ask to see proof of general liability insurance before you can move in.

Similarly, some clients might only work with your business if you carry general liability insurance.

“General liability coverage offers reassurance to companies and clients that are interested in working with you, and shows that your business finances are secure,”  Lea says.

How to get general liability coverage

Follow these steps to purchase a general liability business insurance policy:

• Determine your coverage limits. Every small business has different liability coverage needs. In general, businesses that face more risk, such as a construction company, will need higher coverage limits. If you aren’t sure how much general liability insurance your business should have, consider speaking with an agent who can make a recommendation based on your situation.
• Get quotes. Because general liability insurance premiums vary, it’s important to get quotes from multiple insurance companies. Aim to get quotes from at least three different carriers to see which one can provide the best deal. Make sure to get quotes for the same coverage types and limits for an accurate comparison.
• Choose an insurance carrier. Once you’ve received quotes, compare your options to choose the best commercial insurance carrier for your business. It’s a good idea to evaluate carriers based on financial stability, customer satisfaction ratings, policy management tools and discounts.
• Purchase the policy. Once you’ve selected the best option, you can purchase your general liability insurance policy. Many of the largest commercial insurance companies sell policies online, but you can also purchase a policy through an agent if you need help or have questions.

Commercial property vs. general liability insurance

Commercial property and general liability are two common types of small business insurance. They can be purchased separately or together as part of a business owner's policy (BOP).

• General liability insurance protects your business from third-party claims of bodily injury, property damage and advertising injury.
• Commercial property insurance protects your business's physical assets from covered events such as fire, theft, vandalism and other perils. This includes the building where your business is located; company property like computers, supplies, furniture and tools; and expenses and lost revenue if a covered event forces you to close temporarily.

General liability insurance limitations and exclusions

General liability insurance has some limitations for small businesses, and it won’t cover all the financial risks you could possibly face.

For example, general liability insurance only covers third-party property damage, so it won’t cover damaged business equipment or inventory. If you need that coverage, you should purchase commercial property insurance.

Similarly, general liability insurance doesn’t apply when driving a business-owned vehicle. If your business owns or leases vehicles, you’re legally required to carry commercial auto insurance in most states.

For many small businesses, general liability insurance on its own doesn’t provide enough protection. You must supplement it with additional policies to get comprehensive coverage for all the potential risks you might encounter. For instance, if your business offers professional guidance or services, general liability insurance won’t cover claims related to negligence—that’s where professional liability insurance comes into play.

“General liability insurance is not a replacement for professional liability insurance and vice versa,” Lea says. “These two policies cover totally different types of risks. General liability protects a business if it is held liable for injury or property damage arising from daily operations. Professional liability covers companies from claims related to professional services or advice. It’s smart for companies to have both, as often these are where companies make the most claims.”

What our expert says

Q: I run a small consulting shop. Why did I need general liability insurance?

Andy Lea Chief insurance officer at Embroker, a digital insurance company.

"Even if you think you’re unlikely to face a lawsuit, insurance is there to protect you, typically at an affordable cost – especially when compared to legal fees. General liability insurance is for everyone, not just big businesses. Everyone from independent consultants and contractors to tradespeople should have it."