What Is a General Liability Insurance Policy?

secure Editorial Standards

SmartFinancial Offers Unbiased, Fact-based Information. Our fact-checked articles are intended to educate insurance shoppers so they can make the right buying decisions. Learn More

General liability insurance (GLI) protects your business in the event it is accused of causing damage to an individual or their property. Businesses are not always required to have general liability insurance but it is encouraged, as policies can protect against litigation involving injury, damaged property or mistakes made while providing services. Coverage may also include protection against slander and libel, legal defense costs and medical bills incurred by the damaged party.

Keep reading to see how general liability works and what it costs.

How Does General Liability Insurance Work?

General liability insurance, also called commercial liability insurance, provides financial protection for your business in the event it is accused of causing bodily injury or property damage to a client. Once a claim has been filed, your GLI policy will offer you financial compensation up to your plan’s limits. If you feel you need higher limits, you can purchase an additional commercial umbrella policy.

General Liability Coverage Examples

Below are some examples of when commercial general liability insurance may reimburse you for another party’s losses:

  • A customer visits your business and trips on uneven flooring and is hurt.
  • An employee leaves the water running at a client's house while doing construction work and causes flood damage to the client’s property.
  • Someone files a lawsuit against your business accusing your advertisements of being misleading.

What Does General Liability Insurance Cover?

General liability insurance for business owners provides a wide range of coverage, including bodily injury, property damage and personal injury.




Bodily Injury

Your business is held responsible for an injury a customer or client suffers.

You’re pressure washing your client’s business entry walkway and the client slips on the wet ground.

Property Damage

Your business is legally liable for damaging customer’s or client’s property.

Your landscaping business is trimming a client’s tree branches but the branch falls on the client’s roof.

Personal and Advertising Injury

Your business is held responsible for damaging another party’s personal or intellectual rights.

Your most recent marketing campaign criticizes your competitor’s integrity and they sue you for slander.

Bodily Injury

Bodily injury protection provides financial assistance when you’re found legally liable for the physical harm caused to a client when they’re on your property or if your actions cause a client to be injured while you’re on their property.

Your general liability policy will include medical expense coverage, which pays when your business can be held liable for another person’s medical bills.

Covered expenses may include treatment for physical therapy, acupuncture, chiropractic and more. The medical expense coverage will apply to each injured party, up to $5,000 depending on the policy.

Property Damage

Property damage coverage provides financial protection if you’re found legally responsible for the damage caused to a client’s personal property or the property of another business. The following examples show how general liability insurance can help with damaged property:

  • The employee of a building inspector knocks over a valuable marble statue while on their way back to their work truck. If the statue is damaged and the owner demands reparations, the building inspector’s general liability insurance will help cover the cost.
  • A mobile massage therapist is conducting an at-home session for a customer and accidentally knocks over a small table while moving around the client, causing the table to crack. The massage therapist’s general liability insurance would help cover the costs to repair or replace the damaged table.

Personal and Advertising Injury

GLI policies may include coverage when somebody sues you for damage to their reputation or for copyright.

  • Slander and libel: Protect your business if you or your employee says something dishonest or defamatory about another party and they sue you for damages to their reputation.
  • Advertising injury: Protect your company if you’re accused of using another person’s ideas in your advertisement as well as if your marketing materials infringe on another’s copyright.

Other Coverage

Other types of coverages that business owners may enjoy in their general liability policy may include:

  • Electronic data liability: Includes coverage for damage caused to a client’s electronic data. Coverage can be as high as $25,000.
  • Defense costs: Cover the costs associated with any legal fees that may arise should a client choose to sue you for damages.
  • Hidden costs: Cover hidden costs, such as the costs of earnings for reasonable expenses that occur due to a claims investigation.
  • Worldwide coverage: Cover claims that occur anywhere in the world that are brought against you or your company. Essentially, any working person who needs to travel outside of the country for business can be protected.

What Isn’t Covered?

General liability insurance will not cover the following situations:

  1. Commercial auto accidents caused by you or your employees while driving for work. You would instead need to purchase a commercial auto policy in order to protect your vehicle and your employees while behind the wheel. Requirements for commercial auto insurance will differ by state.
  2. Employee injuries or illnesses caused by work. Businesses can purchase workers’ compensation which provides benefits to employees that can help them recover from a work-related illness or injury.
  3. Damage to your business property. Purchasing a commercial property insurance policy will help protect any business-related property you own or rent, including buildings and business equipment.
  4. Mistakes or errors caused by professional services. Errors and omission coverage would need to be purchased so you or your business are protected in case you’re sued due to a mistake made while providing a service, such as accounting or marketing.
  5. Claims that cost more than your liability limits. Commercial umbrella insurance extends your limits, protecting you from exhausting your claim limit should an expensive situation arise.
  6. Purposeful acts of wrongdoing done by you or your employees.
General Liability Insurance That's Affordable and Tailored For You.

Is General Liability Insurance Required?

There are typically no state requirements to carry general liability insurance but it may be necessary in certain industries. Bidding for certain government contracts, for example, may require you to show proof of general liability insurance.

All businesses should strongly consider general liability insurance even if their industry or state does not require it. If you are sued by someone because of your actions or the actions of an employee and they win, you may be out thousands of dollars.

What Types of Businesses Benefit From General Liability Insurance?

Businesses across all industries are encouraged to maintain general liability insurance. Below are some examples of industries in which GLI could be beneficial:

  • Any small business owner
  • Landscaping
  • General contracting
  • Real estate
  • Consulting
  • Marketing
  • Janitorial
  • Artist
  • IT services

How Much General Liability is Needed for a Small Business?

The amount of coverage you purchase will depend on your business. If your business has a high liability exposure, then you should strongly consider increasing your liability limits. For example, those who work in construction would rely on their liability coverage if one of their heavy tools accidentally damages a client’s furniture. Similarly, a janitorial business may want higher limits because somebody may slip and fall on a floor an employee recently mopped.

How Much Does General Liability Insurance Cost?

General liability insurance will usually cost $30 a month. About 95% of small businesses pay less than $50 per month and only 1% of small businesses pay over $100 per month. The cost of a general liability insurance policy will differ depending on several factors, including:

  • Insurance company
  • Annual revenue
  • Business location
  • Industry
  • Business size

Below is a table breaking down what a general liability insurance policy for a business consulting firm would cost.


Business Consultant



Annual Payroll


Per Occurrence Limit


Aggregate Limit




Monthly Premium


Annual Premium


Data gathered from Hiscox.

Other Types of Liability Insurance

GLI policies provide several types of liability coverage that most businesses could use but there are types of specialized coverage worth considering:

  • Professional liability insurance, or errors and omissions insurance, helps cover you and your company if you make a mistake while providing services for a client.
  • Employment practices liability insurance covers your legal defense costs as well as settlements or judgments if you’re sued for wrongful termination, employment-related harassment or discrimination by a current or former employee.
  • Management liability insurance protects against exposures faced by directors, managers and officers of your business.
  • Commercial auto insurance provides liability coverage for business vehicles and can also protect your employees if they are injured.
  • Commercial umbrella insurance increases the limits of your existing liability coverage so you can cover expensive claims.


What’s the difference between general liability insurance and business owners insurance?

General liability insurance provides financial protection for your business if it is accused of causing harm to someone or their property. Business owners insurance, or more commonly called a business owners policy, is a commercial policy that bundles multiple types of coverage, including general liability, commercial property and business interruption.

Do I need both general liability and professional liability?

You don't need general liability insurance or professional liability insurance to operate a business. General liability insurance will provide the most common coverage but professional liability may be necessary if your business is vulnerable to litigation involving injury, damaged property or mistakes related to services rendered.

Is management liability insurance the same as general liability insurance?

Management liability insurance provides protection against exposures specifically faced by directors, managers and officers of your business. General liability insurance typically provides coverage when anybody at the company can be held for another party’s losses.

What’s the difference between general liability insurance and full coverage insurance?

General liability insurance protects you and your business from damages caused by you against a client. Full coverage is a personal automotive policy that usually includes collision, comprehensive, property damage liability and bodily injury liability.

Key Takeaways

  • General liability insurance protects your business in the event it is accused of causing damage to an individual or their property.
  • Businesses are not required to have general liability insurance, but it is encouraged as policies can protect against litigation involving injury, damaged property or mistakes made while services are provided.
  • Coverage may include protection against slander and libel, legal defense costs and medical bills incurred by the damaged party.
  • General liability insurance will not cover company vehicles, employee injuries or illnesses and some types of professional service errors.
  • The cost of a general liability insurance policy will vary depending on the insurance company, the business's revenue, the location of the business and the type of business being insured.

Protect you and your business by using SmartFinancial. Enter your zip code below or call 855.214.2291 and we’ll send you your free commercial insurance quotes.


Get a Free Commercial Insurance Quote.