General liability is the policy most people mean when they say “business insurance”, and it is also the one most often assumed to cover more than it does. It is worth understanding precisely, because the gap between what it covers and what people think it covers is where uninsured claims live.
Ryan Hearn is a licensed insurance producer in California. This article is educational and is not a recommendation to buy any specific policy. Insightful Coverage is an independent publisher, not an agency, broker or carrier.
What general liability actually covers
Three things, broadly, and all of them are about harm to other people rather than to you or your business.
- Bodily injury to someone else — a customer trips over a cable in your shop, a visitor is hurt at your premises.
- Damage to someone else’s property — you or an employee break something while working at a client’s site.
- Personal and advertising injury — a narrower category than it sounds, covering things like libel, slander and certain advertising claims such as copying someone’s advertising idea.
It also usually pays your legal defence costs, and that matters more than people expect. Defending a claim that goes nowhere still costs money, and on many policies those costs are covered even when the claim is groundless.
What it does not cover, which is the part that catches people out
- Mistakes in your professional work. If you are sued because your advice, design, filing or code was wrong, that is professional liability, and general liability will not respond. This is the single most common gap for consultants, agencies, accountants and anyone selling expertise.
- Injuries to your own employees. That is workers’ compensation, and it is a separate policy with its own legal requirements.
- Damage to your own property. Your stock, equipment and premises are commercial property cover, not liability.
- Your vehicles. Business use of vehicles needs commercial auto; a personal policy often excludes it.
- Employment claims. Discrimination, wrongful termination and harassment claims fall under employment practices liability.
How the limits work
A general liability policy normally carries two numbers. The per-occurrence limit is the most it pays for any single claim. The aggregate limit is the most it pays across the whole policy period, however many claims there are. Once the aggregate is exhausted the policy is spent until it renews, which is why the aggregate matters as much as the headline figure.
Many contracts and commercial leases specify minimum limits, and a landlord or client may require a certificate of insurance before you can start. If you are quoting for work, it is worth asking what limits the contract demands before you buy, rather than discovering afterwards that yours are too low.
Do you need it if you work from home?
Often, yes, and your homeowners or renters policy will not fill the gap. A standard personal policy limits cover for business property severely and generally will not respond at all to a client injured while visiting your home. If clients or suppliers come to you, or if you carry equipment to their sites, that is exactly the exposure general liability is for.
Related reading
- 12 types of business insurance coverage explained — where general liability sits among the rest.
- Best business insurance providers — which carriers suit which kind of business.
- Business insurance checklist — work out which policies apply to you.
- Factors that impact business insurance costs — what moves the premium.
