Key takeaways:

  • General liability insurance can cover legal or settlement costs if a business causes harm to another person or their property.

  • Most business owners’ policies include some general liability insurance coverage.

  • Many business owners may need additional types of liability coverage to protect against additional risks.

Commercial general liability insurance helps protect a business financially if the business harms or is accused of harming someone or their property.

General liability insurance can pay out in case of injuries that take place on site or property damage caused by the business’s employees. It also covers several other types of injury claims, like libel, slander and copyright infringement.

There are many types of liability claims that aren’t typically covered by general liability insurance, though — injuries sustained by employees on the job, for instance, or harm that results from a service provider making a mistake. Business owners may need additional types of liability coverage depending on their industry and company size.

What does general liability insurance cover?

If your business’s operations or your employees cause property damage, personal injury or harm to someone’s reputation, general liability insurance can cover your legal and settlement costs.

Specifically, most general liability insurance policies can pay out in cases of:

Third-party bodily injuries that occur on your property or as a result of an interaction with your business or employees. (This does not include injuries sustained by employees.)

Third-party property damage, or damage to someone else’s property caused by your business or its employees.

Personal and advertising injury. If your business says something publicly that prompts someone else to sue you for copyright infringement, libel or slander, general liability coverage can pay for your legal expenses and damages, if any.

What isn’t covered by general liability insurance?

Businesses often need additional kinds of liability protection beyond what’s described above. Sometimes these types of coverage can be attached to a general liability policy. Other times, businesses may need to purchase them separately.

Typically, general liability insurance does not protect business owners in cases of:

Harm that results from inadequate performance. If a business performs a service — think accountants, lawyers, doctors and architects — clients might sue them if they think they were negligent or made a mistake that resulted in harm. Professional liability insurance, which is often known as errors and omissions insurance, protects against those types of claims.

Harm caused by a product your business manufactured, delivered or sold. If a customer is injured by a defective product — and if you were involved in getting that product to them, even if you weren’t the manufacturer — they may file a lawsuit. Product liability insurance provides protection against those types of claims.

Injuries your employees suffer on the job. The part of a general liability policy that covers bodily injury liability applies only to third parties, not to employees.

  • Workers’ compensation pays for medical costs, physical therapy and lost wages while an employee recovers from a workplace injury, regardless of who is to blame for the injury.

  • If an employee sues you for a claim like wrongful termination or sexual harassment, employment practices liability insurance can cover those legal and settlement costs.

Other types of liability insurance include, for example, cyber liability insurance, which can pay out after a data breach.

Claims made vs. occurrence policies

Usually, general liability insurance policies are occurrence policies. These kinds of liability insurance policies must be in place when the injury happens in order to provide protection.

For example, say someone was injured on a business’s property in 2018. The business purchased general liability insurance in 2019. Then, the person who was injured filed a lawsuit in 2020. If this business owner has an occurrence policy, it might not provide protection.

Occurrence policies also provide retroactive protection after the business owner stops paying premiums.

Let’s say our example business owner purchased general liability insurance in 2018, before the injury on their property. Then the business owner changed insurance providers at the end of 2019. If the policy in place in 2018 was an occurrence policy, it could still pay out to cover their legal expenses and settlement costs for a lawsuit filed in 2020, after the coverage had lapsed.

Some other types of liability insurance, including professional liability insurance, are more likely to be claims-made policies than occurrence policies. Claims-made policies provide protection if your coverage is active when the claim is filed, as long as the event in question took place within some period defined in the policy.

What are the typical general liability insurance limits?

General liability insurance policies typically include two numbers: the per-occurrence limit and the aggregate limit.

The per-occurrence limit is the maximum amount the insurance company will pay out for a single claim. This includes both legal and settlement costs. A typical general liability policy includes a per-occurrence limit of $1 million.

The aggregate limit is the total amount the insurer will pay out in a single year. A typical general liability policy includes an aggregate limit of $2 million. The aggregate limit refreshes every year if you have an occurrence-based policy.

Most business owners’ policies include general liability coverage, along with business interruption insurance and property insurance.

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