Here's what keeps business owners up at night: you're running a successful operation, serving customers, building your dream—and then someone gets hurt. Maybe they slip on your wet floor. Maybe your contractor accidentally damages a client's expensive equipment. Maybe an overzealous employee posts something online that gets you sued for defamation. Any of these scenarios could cost you tens of thousands of dollars in legal fees alone. That's exactly what general liability insurance is designed to prevent.
General liability insurance is the foundation of business insurance coverage. It protects your business from financial losses when a third party—a customer, client, vendor, or even just a visitor—claims that your business caused them bodily injury, damaged their property, or harmed their reputation. Let's break down exactly what this coverage includes and why it matters for your business.
Bodily Injury Coverage: When Someone Gets Hurt
The most common general liability claims involve bodily injury. This is when someone who isn't your employee gets physically hurt because of your business operations. The classic example? A customer slips on a wet floor in your retail store and breaks their ankle. Your general liability policy would cover their medical expenses, ambulance fees, lost wages if they can't work, and any legal costs if they decide to sue you.
But bodily injury coverage extends far beyond slip-and-fall accidents. If you're a contractor and your ladder falls on a homeowner, that's covered. If you own a restaurant and a customer gets food poisoning, that's covered. If you run a consulting business and a client trips over your laptop bag during a meeting at their office, yes—that's covered too. The key is that the injury happened in connection with your business operations and involves a third party, not one of your own employees.
What makes this coverage especially valuable is that it includes your legal defense costs. According to recent industry data, the average cost of litigated claims is 14.5 times higher than non-litigated claims. Even if you win the lawsuit, attorney fees can bankrupt a small business. General liability insurance covers those legal costs regardless of whether you're found liable, which means you can defend yourself properly without emptying your business bank account.
Property Damage: When You Break Someone Else's Stuff
Property damage coverage is the second pillar of general liability insurance, and it's exactly what it sounds like: protection when your business damages someone else's property. This happens more often than you might think, and the costs can add up fast.
Let's say you're a plumber, and while fixing a leak, you accidentally crack an expensive marble countertop. Or you're a photographer, and you knock over a valuable vase at a client's home during a shoot. Maybe you run a cleaning service and your employee damages a client's hardwood floors with the wrong cleaning solution. In all these scenarios, your general liability insurance would cover the cost of repairing or replacing the damaged property.
According to 2024 insurance data, property damage claim volume increased by 4.6% compared to the previous year, reflecting the growing costs of materials and repairs. A single incident of property damage could easily cost $10,000 or more, especially in commercial settings where equipment and finishes are expensive. Without insurance, that comes straight out of your business profits.
One important note: general liability insurance only covers damage you cause to other people's property. If a fire damages your own store or office, that's covered under commercial property insurance, not general liability. Think of it this way—general liability protects others from you; commercial property insurance protects you from external events.
Personal and Advertising Injury: The Coverage You Didn't Know You Needed
This is the part of general liability coverage that surprises most business owners—and it's increasingly relevant in our social media age. Personal and advertising injury coverage protects you from claims of libel, slander, copyright infringement, trademark violation, and invasion of privacy. If someone sues you because you damaged their reputation, stole their content, or violated their intellectual property rights, this coverage has your back.
Here's a real-world example: an employee at a tech startup tweeted a false statement about a rival company, which then sued for defamation. The startup's general liability insurance covered the legal defense and settlement. Or consider this scenario: you use a competitor's copyrighted image in your marketing materials without permission. They sue you for copyright infringement. Your advertising injury coverage would handle the claim.
Libel and slander claims are particularly common. Libel is written defamation—think negative online reviews, social media posts, or emails that contain false statements damaging someone's reputation. Slander is spoken defamation, like making false accusations about a competitor during a public presentation. Both can result in expensive lawsuits, and both fall under your general liability coverage.
There's one critical limitation to understand: this coverage typically excludes intentional or malicious acts. If you knowingly publish false information to harm a competitor, your insurance won't cover you. The coverage is designed for honest mistakes and employee errors, not deliberate wrongdoing. Additionally, if media and advertising is your primary business, you'll likely need specialized media liability insurance instead, as standard general liability policies exclude these exposures for media companies.
Medical Payments Coverage: The Peace-of-Mind Add-On
Most general liability policies include a medical payments provision, sometimes called "med pay." This coverage pays for immediate medical expenses if someone gets injured on your business property or because of your business operations, regardless of who's at fault. Think of it as a goodwill gesture that can prevent small incidents from turning into major lawsuits.
Here's how it works: a customer trips on your front step and scrapes their knee. You're not necessarily liable—maybe they weren't watching where they were going—but they need a few stitches. Your medical payments coverage would pay for that emergency room visit, typically up to $5,000 or $10,000, without any investigation into fault. This quick payment often satisfies the injured party and prevents them from hiring an attorney and filing a larger bodily injury claim.
What General Liability Insurance Doesn't Cover
Understanding what's not covered is just as important as knowing what is. General liability insurance doesn't cover injuries to your own employees—that's what workers' compensation insurance is for. If an employee hurts their back lifting boxes in your warehouse, general liability won't help. You need workers' comp.
It also doesn't cover commercial auto accidents. If you or an employee causes a car accident while driving for business purposes, you need commercial auto insurance. General liability won't pay for vehicle-related damages or injuries. Similarly, damage to your own business property—your building, equipment, inventory—requires commercial property insurance.
Professional mistakes are another major exclusion. If you're a consultant, accountant, lawyer, or other professional and a client sues you for giving bad advice or making an error that cost them money, general liability won't cover that claim. You need professional liability insurance, also called errors and omissions insurance, for those scenarios.
How Much Coverage Do You Need?
Most small businesses purchase general liability policies with $1 million per occurrence and $2 million aggregate limits, which means the insurance will pay up to $1 million for any single claim and up to $2 million total during the policy period. In fact, 97% of small business customers choose the $1 million per occurrence level. This provides solid protection without breaking the bank.
However, there's a trend toward higher limits, with many businesses now opting for $2 million per occurrence and $4 million aggregate. This shift is driven by increasing litigation costs and the requirements of umbrella insurance policies, which often require higher underlying general liability limits. Your specific needs depend on your industry, business size, and the requirements of your clients or landlords, who may contractually require certain minimum coverage amounts.
What Does General Liability Insurance Cost?
For most small businesses, general liability insurance is surprisingly affordable. The median monthly cost in 2024 was $60, with an average around $85 to $104 per month. That's less than many businesses spend on software subscriptions, yet it protects against losses that could literally end your business overnight.
Your actual cost depends on several factors. Industry is the biggest variable—construction, landscaping, and cleaning businesses typically pay more because they involve higher physical risks, while home-based consultants and IT professionals usually pay less. Location matters too; businesses in states with more litigation pay higher premiums. Your coverage limits, business size, and claims history also affect your rate. Experts predict general liability premiums will increase between 1% and 9% in 2025, continuing a trend of 25 consecutive quarters of rate increases driven by inflation and rising litigation costs.
How to Get Started with General Liability Insurance
Getting general liability coverage is straightforward. Start by assessing your business risks. Do you have customers visiting your location? Do you work at client sites? Do you handle client property? If you answered yes to any of these, you likely need general liability insurance. Many businesses are contractually required to carry it—landlords often require it before you can lease commercial space, and clients frequently require proof of insurance before awarding contracts.
Shop around and compare quotes from multiple insurers. Prices can vary significantly for the same coverage, so it pays to get at least three quotes. Consider bundling general liability with other coverages like commercial property insurance in a Business Owner's Policy, which often costs less than buying policies separately. Review your coverage annually to make sure your limits still match your business needs as you grow. And remember, the cheapest policy isn't always the best—look for insurers with strong financial ratings and good claims service reputations, because you want them to be there when you actually need to file a claim.
