General Liability Insurance Coverage & Cost

Commercial general liability insurance (CGL) protects businesses from financial losses due to third-party claims for bodily injury or property damage, making it one of the most important insurance policies any business will buy. General liability insurance costs vary, but the majority of small business owners pay between $400 and $1,000 per year.

What Is General Liability Insurance?

General liability insurance pays the costs of third-party claims of injury or property damage. While slip-and-fall claims are the most common general liability claim, CGL insurance also protects a business against claims of slander, libel, and advertising injury. Not only does it cover any third-party claims or settlements, but it also covers the legal defense costs for the business.

General Liability Insurance Coverage

The main areas of commercial general liability insurance coverage include medical payments, property damage, and personal and advertising injury.

Medical Payments

Medical payments cover emergency medical expenses for bodily injury on someone else’s property and are found under Coverage C on a CGL policy. There doesn’t need to be proof that someone caused an injury or accident to receive medical payments. It is paid regardless of fault. This coverage does not cover pain or suffering or lost wages, which falls under Coverage A bodily injury liability payments.

If someone is physically injured on the business’s premises, regardless of negligence, the injured party is entitled to medical bills being paid. Say an employee is mopping in your dance studio and forgets to put up a warning sign. If a customer slips, falls, and sustains injuries, they can receive medical payments.

Property Damage

Incidents leading to property damage for third parties ― customers, patrons, or bystanders ― are covered by the general liability policy. This could be on-premises or off-premises during the course of business operations. This is not contingent on fault by the business. For example, a business can be found at fault but not grossly negligent.

Let’s say you run a residential cleaning service. One of your employees is cleaning a wealthy customer’s home and accidentally breaks an expensive vase. CGL insurance would cover the cost of damages up to your policy limit, less your deductible.

Personal & Advertising Injury

Personal injury is ruining someone’s reputation through libel or slander. Claims could be made based on oral comments, statements made to customers, or even social media posts. When a business or its people make statements indicating another party is a “crook” or “irreputable,” they run the risk of a personal injury claim.

For example, in an advertising campaign for your auto repair business, you compare yourself to a competitor. You state that your competitor has dishonest pricing. Your competitor finds this claim unfounded and sues you for defamation. A commercial general liability policy would cover your defense up to your personal damages advertising coverage limit.

Do I Need General Liability Insurance?

Not every business is required to have general liability insurance, but every business should have coverage. If your business is leasing commercial space, your lease agreement will likely require you to have a CGL policy with at least $1 million in coverage. However, even if your business is not required to have general liability insurance, there are some important reasons to carry a policy:

1. A general liability policy will cover the most common insurance claims that businesses face.
2. Insurance costs are tax-deductible.
3. Consumers have confidence in a company that maintains adequate insurance.
4. Other organizations or vendors you work with may require you to have a policy.

Is General Liability Insurance Required by Law?

General liability insurance is rarely required by law. Most small businesses in most jurisdictions don’t need to have a policy. However, there are some professional organizations and cities that do require businesses to have CGL coverage, so it is best to check with your local business authority to make sure. General liability insurance is most often required when a business has a contract with another party who wants to be held harmless if there is a claim. Some examples of this include commercial lease companies, big contracts, and vendors.

Commercial General Liability Insurance Cost

For most small business owners, general liability costs range between $400 and $1,000 per year. However, depending on the size, type, or industry of the business as well as the coverage limits and deductibles, some small businesses can pay more than $1,000 per year for a CGL policy. If cost is a concern, you may be able to find cheaper insurance premiums by shopping around. Different carriers have different pricing based on industry.

General Liability Cost by Industry

The following looks at various industries and determines a starting premium for each.

*Rates provided by CoverWallet for companies with no employees and $70,000 in revenues and $1 million in coverage.

Other Factors That Impact General Liability Costs

Your general liability insurance policy’s premium is based on several factors. The insurance carrier will look at:

• Business location
• Industry claims data
• Revenue
• Employee size
• Claims history

Keep in mind that your selected amount of coverage will also affect your premium. Many insurance agents agree that getting double the coverage is well worth the added cost. You aren’t doubling your premium when you double your coverage; it is very affordable to do so.

The Cost of Not Having General Liability Insurance

Small business owners who don’t have general liability coverage are liable for 100% of the costs of any claims, lawsuit defense costs, and settlements. Business owners must consider both the most common and the costliest claims when buying general liability insurance policies.

It isn’t the $500 property loss claim that small business owners need to be concerned with—it is the $200,000 of damages to a neighboring business due to something that happened as a result of your business operations.

According to the Insurance Journal, small business owners make claims on burglary and theft most often, accounting for 20% of claims but only averaging $8,000. Slip-and-fall injury claims account for 10% of all claims but are costlier, averaging $20,000 per claim. Other types of customer injury or property damage account for less than 5% of all claims but are more expensive on average at $30,000. One of the least common liability claims is reputation harm. However, this is the costliest on average at $50,000.

How to Get General Liability Insurance

You’ll purchase general liability insurance from a private insurance carrier licensed to sell insurance in the state in which you do business. Insurance carriers may employ or contract with agents or brokers to underwrite policies while some will allow you to purchase a policy directly. For more information on where to get general liability insurance, see our article evaluating the best general liability companies.

Insurance Carrier

An insurance carrier is a company that underwrites the insurance policy and takes on the risk of your business liability. Premiums are paid to the carrier who may write the policy through a call center, online, or may work with independent agents and brokers to market policies on their behalf. For those who know what company they want to work with, going directly to the carrier can save you from dealing with a middleman.

The Hartford is a top-rated small business insurance carrier that sells general liability or will package general liability insurance with commercial property in a business owners policy. It is known to create robust policies for a reasonable price in many industries particularly those considered Main Street businesses.

Visit The Hartford

Independent Insurance Broker or Agent

Independent agents and brokers are self-employed or employed by independent insurance offices. Agents get appointed with an insurance carrier to offer specific brands of insurance. Brokers work for the consumer, shopping policies around to find the best fit for the buyer. Independent agents and brokers are good sources to use when shopping for insurance to understand better what the marketplace offers in coverage and price.

CoverWallet is an online broker that will shop your policy around to find the best carrier for your policy. You can benefit from CoverWallet’s industry expertise and know that you are getting the best deal for your policy.

Visit CoverWallet

Insurance Referral Service

An insurance referral service is similar to an agent or broker. These services pair you with the right insurance carrier by understanding your needs and the marketplace. Referral services receive a fee from the carrier for sending the business to them.

CommercialInsurance.net is an insurance referral service that has more than 200 insurance carrier partners your policy could be placed with. It uses its extensive experience in the insurance industry to understand which carrier will best fit your business needs based on the work you do and the common risks your company faces.

Visit CommercialInsurance.net

Bottom Line

A commercial general liability insurance policy pays costs for claims where members of the public (third parties) are injured accidentally or experience personal property damage on a business’s premises. Claims and lawsuits can cost hundreds of thousands, if not millions, in settlements, legal fees, and awards. Every business should consider a general liability insurance policy to protect against these potentially bankrupting events.