General Liability
Also known as: GL, CGL, Commercial General Liability
General Liability — also called Commercial General Liability (CGL) — is the foundation commercial insurance policy. It pays for defense costs, settlements, and judgments when a third party (customer, vendor, passerby) sues your business over physical harm or property damage. Standard limits are $1M per-occurrence / $2M aggregate; higher limits ($2M/$4M, $5M/$10M) are common for contractors, healthcare, and event-based businesses.
A GL policy responds to three claim categories: bodily injury (slip-and-fall, dog bite, falling-merchandise injury), property damage (water leak into adjacent unit, damaged client property during service), and personal & advertising injury (libel, slander, copyright infringement in marketing, false advertising). Defense costs are paid in addition to policy limits in most ISO-form policies.
What GL does NOT cover: employee injuries (that's Workers Comp), professional mistakes/E&O (that's Professional Liability), damage to your own property (Commercial Property), vehicle-related liability (Commercial Auto), and intentional acts. Most small businesses bundle GL into a BOP for a 10-15% discount vs standalone.
Real-world scenario
Marcus is a hypothetical small-business owner; his scenario illustrates how General Liability responds to a typical bodily-injury claim. It is not based on a specific real customer, claim, or quote from any carrier.
Marcus, food truck operator — Austin, TX (hypothetical). Single-truck operation serving festivals and corporate events, ~$240K annual revenue, 2 part-time helpers. His event venues all require $1M GL with the venue listed as Additional Insured on the certificate of insurance.
At a Saturday food-truck rally, a customer carrying tacos and a soda steps off the truck's service window, hits a small puddle from Marcus's drink-station ice cooler, and falls hard on her elbow. Emergency room visit confirms a fractured radius requiring surgery + 8 weeks of physical therapy. Medical bills: $18,400. She retains a personal-injury attorney who demands $85,000 (medical + pain & suffering + lost wages from her job as a graphic designer). The festival's event-insurance carrier denies the claim, pointing at Marcus.
Marcus's GL policy — $1M per-occurrence / $2M aggregate, $500 deductible — pays the full $73,500 settlement after deductible plus $14,200 in defense costs. The festival reads the COI showing it as Additional Insured and is dismissed from the suit. His annual GL premium: ~$45/month, $540/year (industry-typical median for small-business GL, 2024). Without GL, the $87,700 out-of-pocket would have closed the operation permanently.
How it affects your premium
GL premium scales primarily with these factors:
- Industry risk class — biggest single driver. Consulting/IT pays ~$30/mo; retail pays ~$45/mo; restaurants/food pays ~$80/mo; contractors pay ~$130/mo (carrier benchmark data, 2024).
- Annual revenue — exposure base for premium calculation; doubles revenue typically increases premium 60-90% (not 1:1 because much risk is per-occurrence, not revenue-scaled).
- Limits selected — moving from $1M/$2M to $2M/$4M typically adds 25-40%; $5M/$10M adds 60-100%.
- Claims history — any open or closed bodily-injury or property-damage claim in the last 5 years adds 15-40% surcharge.
- Location + foot traffic — physical premises with public access (retail, restaurant) carries 20-30% surcharge over home-based/online operations.
- Subcontractors used — using uninsured subs creates direct liability transfer; carriers surcharge or require COI on file.
- Deductible — moving from $500 to $2,500 typically saves 5-12%.
Per the industry-typical 2024 cost report, median small-business GL premium = $45/month ($540/year); bottom-quartile starts at $25/mo for low-risk classes; top-quartile reaches $130+/mo for contractors and food service.
Common misconceptions
Myth: General Liability covers my employees if they get hurt on the job.
Reality: GL covers third-party claims only (customers, vendors, passersby). Employee injuries fall under Workers Compensation, which is state-mandated in 49 states the moment you hire employee #1. GL explicitly excludes employee bodily injury via the Employer's Liability exclusion.
Myth: If I incorporate as an LLC, I don't need General Liability.
Reality: LLC limits liability to business assets — but the business itself can still be sued, judgments depleted, and assets seized. GL pays defense costs (~$5K-$50K even on dismissed suits) and judgments without touching your personal assets OR your LLC's bank account. Most landlords, clients, and event venues require GL regardless of LLC status.
Myth: $1M GL is way more coverage than I'll ever need.
Reality: Industry-wide, the average bodily-injury claim settles in the $50K-$200K range, but severity-claim outliers regularly exceed $1M. A serious slip-and-fall with permanent injury, a single severe dog bite, or a foreign-object-in-food incident can settle $500K-$2M+. $1M is the floor, not the ceiling — that's why Commercial Umbrella exists for excess coverage above $1M.
Frequently asked questions
How much does General Liability insurance cost?
What does General Liability NOT cover?
Is General Liability the same as a Business Owners Policy?
Do I need General Liability if I work from home?
Sources cited
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