For a business entity or independent contractor, a single liability claim can lead to insolvency. General Liability Insurance (GL), formally known as Commercial General Liability (CGL), acts as your primary financial defense against third-party lawsuits.
According to the Insurance Information Institute, this commercial policy protects your LLC from financial loss due to property damage liability, bodily injury claims, or litigation costs. It is the mandatory requirement for commercial risk management.
What Does General Liability Cover?
Most Commercial General Liability policies provide indemnity for three specific claim categories:
1. Third-Party Bodily Injury Liability
This covers medical costs and legal defense fees if a non-employee files a claim for injury on your premises.
- Claim Example: A vendor slips at your office. Your GL policy pays the settlement and court costs.
2. Third-Party Property Damage Liability
This reimburses costs to repair property owned by others that your business operations damage. This is a critical coverage requirement for contractors.
- Claim Example: A contractor drops tools on a client’s vehicle. The liability policy covers the repair bill.
3. Personal and Advertising Injury
This covers non-physical torts such as libel, slander, or copyright infringement claims in your advertising.
General Liability vs. Professional Liability (E&O)
Business owners often confuse these coverage types.
- General Liability:Â Covers physical claims (slip and fall, damage).
- Professional Liability (E&O):Â Covers financial negligence and service errors.
Policy Note: An accountant needs Professional Liability for audit errors, but General Liability for office accidents.
Why Is Coverage Required?
- Commercial Leases: Landlords require a Certificate of Insurance (COI) verifying liability limits before signing a lease.
- Vendor Contracts: Corporate and government contracts mandate GL coverage to mitigate vendor risk.
How Much Does General Liability Insurance Cost?
Premium Analysis:
According to underwriting data, the median cost of General Liability Insurance is approximately $500 to $600 annually.
Rate Factors:
- High Risk Class: General Contractors and tradesmen pay higher premiums due to physical risk exposure.
- Low Risk Class: Consultants and IT firms pay the lowest liability rates.
Frequently Asked Questions
Does General Liability Insurance cover my employees if they get hurt?
No. General Liability is strictly for third parties (customers and passersby). If your employee is injured on the job, that claim is covered by Workers’ Compensation Insurance. Most GL policies explicitly exclude employee injuries.
Does it cover product liability?
Yes, usually. Most Commercial General Liability policies include Products-Completed Operations Coverage. This protects you if a product you sold or manufactured hurts someone or causes damage after it has left your possession.
Is a Business Owner's Policy (BOP) the same as General Liability?
Not exactly. A Business Owner’s Policy (BOP) is a bundle that combines General Liability with Commercial Property Insurance (protecting your equipment and building) at a discounted rate. For many small businesses, a BOP is the most cost-effective way to get comprehensive coverage.
Can I get GL insurance if I work from home?
Yes. Homeowner’s insurance policies rarely cover business-related accidents. If a client visits your home office and falls, you need a commercial GL policy or a specific endorsement to protect your personal assets.
