Imagine this for a moment. A customer walks into your shop, slips on a freshly mopped floor, and breaks their wrist. The medical bills come to $15,000—but the lawsuit demands $200,000 for lost income and pain and suffering. One accident. One claim. And suddenly, your business savings, assets, and even personal finances are at risk.
This is exactly why general liability insurance exists.
No matter what kind of business you run—retail store, online brand, home-based consultancy, or construction company—general liability insurance is often the first and most important policy you should have. It protects you from the everyday risks that come with serving customers, working on client property, or simply operating in public spaces.
If you’ve ever wondered what general liability insurance really covers, how much it costs, or whether you truly need it, this guide will walk you through everything in clear, practical terms.
What Is General Liability Insurance?
General liability insurance—also known as commercial general liability (CGL)—protects your business when someone claims you caused them bodily injury, property damage, or personal and advertising injury.
In simple terms, it covers the cost of being sued.
This insurance steps in when your business is legally responsible for harm to others. It pays for attorney fees, court costs, settlements, and judgments, even if the claim is false or exaggerated. Legal defense alone can cost tens of thousands of dollars, and general liability insurance covers those costs from day one.
What it does not cover are injuries to your employees, damage to your own property, or professional mistakes. Those risks require separate policies.
What Does General Liability Insurance Cover?
General liability insurance is broad, but it focuses on four main areas. Understanding these helps you see why this coverage is considered essential.
Bodily Injury
Bodily injury coverage applies when someone is physically hurt because of your business operations. This includes medical bills, lost wages, pain and suffering, and legal costs.
Examples include:
- A customer trips over a cord in your office
- A client slips in your parking lot
- A guest at your event becomes ill from food you served
- A contractor accidentally injures a homeowner while working
Coverage applies both at your location and off-site, such as at client homes, job sites, or events.
Property Damage
Property damage coverage protects you when your business damages someone else’s property.
Common situations include:
- A plumber floods a client’s basement
- A cleaner damages hardwood floors
- A landscaper breaks a window
- A delivery driver knocks over expensive equipment
Repair and replacement costs can escalate quickly. Without insurance, those costs come directly out of your pocket.
Personal and Advertising Injury
This coverage protects against non-physical claims that can still be financially devastating, including:
- Libel and slander
- Copyright or slogan infringement
- False advertising claims
- Invasion of privacy
- Wrongful eviction (for landlords)
If someone claims your marketing harmed their reputation or violated their rights, this coverage helps cover legal defense and settlements.
Medical Payments
Medical payments coverage pays for minor injuries regardless of fault—often without a lawsuit. It typically covers $5,000 to $10,000 per incident and helps resolve small claims quickly.
For example, if someone trips in your store and needs stitches, medical payments coverage can handle the ER bill immediately, reducing the chance of a lawsuit later.
What General Liability Insurance Does Not Cover
Knowing what’s excluded is just as important as knowing what’s covered.
General liability insurance does not cover:
- Professional mistakes or bad advice (requires professional liability insurance)
- Employee injuries (covered by workers’ compensation)
- Damage to your own building or equipment (requires property insurance)
- Intentional harm or illegal acts
- Auto accidents (covered by commercial auto insurance)
- Cyberattacks and data breaches (requires cyber liability insurance)
- Pollution or environmental damage (requires specialized coverage)
Many claim denials happen because business owners assume general liability covers everything—it doesn’t.
How Much Does General Liability Insurance Cost?
For most small businesses, general liability insurance costs between $400 and $1,500 per year. That’s often less than $100 per month for coverage that can save your business from bankruptcy.
Pricing depends on:
- Industry risk (consultants pay less than contractors)
- Business size and revenue
- Number of employees
- Physical location and foot traffic
- Coverage limits and deductibles
- Claims history
- State and legal environment
Low-risk businesses may pay under $500 annually, while higher-risk businesses with customer-facing locations may pay $2,000 or more.
Understanding Coverage Limits
Most policies are written as $1 million per occurrence / $2 million aggregate.
- Per occurrence is the maximum paid for a single incident
- Aggregate is the total paid for all claims during the policy year
If one claim exceeds your per-occurrence limit, you pay the difference. If total claims exceed your aggregate limit, coverage stops until renewal.
Many businesses start with $1M/$2M limits, but larger or higher-risk companies often choose higher limits or add an umbrella policy for extra protection.
How Much Coverage Do You Really Need?
Start with any legal or contractual requirements. Leases, vendors, and clients often require minimum limits.
Then consider:
- Customer foot traffic
- Off-site work at client locations
- Value of customer property you handle
- Your personal and business assets
- Industry-specific risks
For most small businesses, $1M/$2M is sufficient. Businesses with higher exposure should consider $2M or more.
General Liability vs. Other Business Insurance
General liability works best as part of a complete insurance plan.
- General Liability vs. Professional Liability: One covers accidents; the other covers mistakes and bad advice
- General Liability vs. Workers’ Comp: One covers the public; the other covers employees
- General Liability vs. Property Insurance: One protects others’ property; the other protects yours
- General Liability vs. Business Owner’s Policy (BOP): A BOP bundles general liability, property, and business interruption coverage at a discount
How to Get General Liability Insurance
- Assess your risks and coverage needs
- Gather business details (revenue, employees, operations)
- Get multiple quotes
- Compare coverage—not just price
- Ask about exclusions and claims handling
- Review your policy every year
An independent insurance agent can simplify the process and help you avoid costly gaps.
Common Mistakes to Avoid
- Choosing the cheapest policy without reviewing coverage
- Assuming personal insurance covers business activities
- Failing to update coverage as the business grows
- Ignoring exclusions
- Not reading the policy documents
Why General Liability Insurance Is Worth It
One lawsuit can wipe out years of hard work. General liability insurance gives you the freedom to operate confidently, knowing you’re protected against the everyday risks of running a business.
For a relatively small annual cost, you’re protecting:
- Your business income
- Your assets
- Your reputation
- Your peace of mind
The best time to buy insurance is before something goes wrong. Once an accident happens, it’s too late.
If you don’t have general liability insurance yet, make it a priority. If you do, review your coverage and make sure it still fits your business today. Protect what you’ve built—so you can focus on growing it tomorrow.