General Liability Insurance: What’s Covered

Running a business comes with risks. Whether you operate a retail store, run a tech startup, or provide professional services, accidents and lawsuits can happen unexpectedly. One slip-and-fall incident or property damage claim could cost thousands of dollars. That’s where general liability insurance steps in.

General liability insurance, also known as business liability insurance, is one of the most essential types of coverage for companies of all sizes. It helps protect your business from claims involving bodily injury, property damage, and more. This guide explains what general liability insurance covers, what it doesn’t, and why it’s crucial for your company.

What Is General Liability Insurance?

General liability insurance is a policy designed to protect businesses from financial loss if they are found legally responsible for injuries or damages caused to others. It covers a wide range of risks and is often the first type of insurance a new business purchases.

Most landlords, clients, and vendors require proof of general liability coverage before signing contracts, making it a cornerstone of business protection.

What Does General Liability Insurance Cover?

Here’s a closer look at what’s typically included in a general liability policy:

1. Bodily Injury

If someone is injured on your property or because of your business operations, general liability insurance covers:

• Medical expenses
• Legal defense fees
• Settlements or judgments

Example: A customer slips on a wet floor in your store and breaks their arm. Your insurance would cover their medical costs and any lawsuit expenses.

2. Property Damage

This coverage protects your business if you accidentally damage someone else’s property.

• Covers repair or replacement costs
• Includes damages caused by your employees during business operations

Example: A contractor accidentally damages a client’s home during a renovation project. Insurance covers the repairs.

3. Personal and Advertising Injury

General liability insurance also protects against non-physical harm, such as:

• Slander or libel claims
• Copyright infringement
• False advertising allegations

Example: A competitor sues you for using their slogan in your marketing materials. Your insurance would cover legal fees.

4. Medical Payments

This provision pays for immediate medical expenses if someone is injured on your premises, regardless of fault. It helps prevent small accidents from escalating into lawsuits.

5. Legal Defense Costs

General liability insurance covers attorney fees, court costs, and settlements, even if a claim is groundless. Legal defense can be expensive, making this coverage vital.

6. Damage to Rented Property

If your business rents office or retail space, this coverage pays for damage to the property caused by fire, explosion, or other covered risks.

What General Liability Insurance Does NOT Cover

While it offers broad protection, general liability insurance has exclusions. You’ll need other policies for these risks:

Who Needs General Liability Insurance?

Every business, regardless of size or industry, should consider this coverage. It’s especially critical for:

• Retail stores and restaurants with customer foot traffic
• Contractors and construction companies
• Service providers and consultants
• Event planners and marketing agencies
• Home-based businesses (client visits still pose risks)

Even freelancers and small startups benefit from general liability coverage because lawsuits can happen to anyone.

How Much Does General Liability Insurance Cost?

The cost varies based on factors like:

• Business size and revenue
• Industry and level of risk
• Location
• Coverage limits
• Claims history

On average, small businesses pay $400 to $1,000 per year for basic coverage, but high-risk industries may pay more.

Coverage Limits to Consider

Most policies have two main limits:

• Per-occurrence limit: The maximum payout for a single claim.
• Aggregate limit: The total payout for all claims in a policy year.

Example: A $1 million per-occurrence limit and $2 million aggregate limit means your insurer will pay up to $1 million for any single claim and no more than $2 million total within the policy year.

Benefits of General Liability Insurance

• Financial Protection: Covers medical bills, repairs, and legal fees.
• Legal Compliance: Required by landlords, clients, and some state regulations.
• Peace of Mind: Allows you to focus on running your business.
• Professional Image: Proof of insurance builds trust with customers and partners.

Tips for Choosing the Right Policy

1. Assess Your Risks: Evaluate your business operations and potential liabilities.
2. Select Adequate Coverage: Don’t settle for the minimum; consider future growth.
3. Bundle Policies: Save money by combining coverage in a Business Owner’s Policy (BOP).
4. Work With a Broker: A broker can help find the best plan for your budget.
5. Review Annually: Reassess coverage as your business evolves.

Real-Life Example

A small catering company accidentally causes a fire at a client’s venue, resulting in $50,000 worth of damage. Because the business has general liability insurance, the insurance company covers repair costs and legal fees, saving the owner from financial disaster.

Final Thoughts

General liability insurance is a foundational policy that every business owner should have. It provides protection against lawsuits, accidents, and unexpected events that could otherwise threaten your livelihood. While it won’t cover every risk, it’s an affordable and essential step toward safeguarding your company’s future.

If you’re launching a new business or reassessing your current coverage, talk to a trusted insurance provider about general liability insurance. It’s a small investment that can save your business from significant financial loss.