A customer slips on a wet floor in your shop and breaks a wrist. A contractor on your crew cracks an expensive tile floor at a client's property. A competitor claims your marketing copy defames their brand. In each case, your business is on the hook: legal defense, the settlement, the judgment if it goes to court.
That's what liability insurance is for. In a business context, "liability insurance" almost always means general liability (GL), specifically a commercial general liability (CGL) policy. This article breaks down what GL covers, what it pays for, what it doesn't touch, and what other policies fill the gaps.
What General Liability Insurance Covers
A standard GL policy is built around three core coverage areas.
Bodily injury covers third-party injuries caused by your business operations or on your premises. If a client trips over equipment at a job site, or a visitor gets hurt at your office, GL is the policy that responds. Not workers comp, which is for your employees only.
Property damage covers harm your business causes to someone else's property. A plumber cracks a water main. A moving company drops a client's television. A landscaper runs over a sprinkler system. These are property damage claims, and GL picks them up.
Personal and advertising injury covers a different category of harm: defamation, slander, copyright infringement in your ads, malicious prosecution, wrongful eviction. It sounds niche, but ad-related claims catch more businesses off guard than most expect.
What a GL Policy Actually Pays For
Coverage isn't just the final settlement check. A standard GL policy typically covers the full cost stack of a claim: legal defense fees, court costs, settlements, and court-ordered judgments, up to your policy limit.
It also includes a medical payments component (sometimes called Coverage C). This is a no-fault sublimit, typically $5,000 to $10,000, that pays minor medical expenses for injured third parties without litigation. It's designed to handle small claims quickly and keep them from becoming lawsuits.
Here's how the coverage categories break down:
| Cost type | Covered by GL? |
|---|---|
| Third-party legal defense fees | Yes |
| Court-ordered damages | Yes |
| Settlements | Yes |
| Medical payments (no-fault, minor injuries) | Yes, subject to sublimit |
| Products and completed operations liability | Yes, typically included |
| Personal and advertising injury | Yes |
| Your own property damage | No |
| Employee injuries | No |
| Professional mistakes or errors | No |
| Auto accidents involving business vehicles | No |
| Data breaches and cyber incidents | No |
| Pollution liability | No |
What Liability Insurance Doesn't Cover
This is where most businesses get caught out. GL is broad, but it has hard exclusions. Knowing what's missing matters more than knowing what's in.
Employee injuries aren't covered. If a worker gets hurt on the job, that's workers compensation coverage territory. Workers comp is required in every state except Texas, where it's optional but still worth carrying. GL only covers third-party injuries: people who aren't on your payroll.
Professional mistakes aren't covered. If a consultant gives bad advice that costs a client money, or a designer misses the brief and gets sued, GL won't respond. That's what a professional liability policy, also called E&O or errors and omissions, is for. Any business that sells expertise needs this separately.
Cyber incidents aren't covered. A data breach, ransomware attack, or theft of customer data falls outside a standard GL policy. The Insurance Information Institute notes that cyber-related losses have become one of the fastest-growing categories of business risk (iii.org). A standalone cyber liability policy is the right response.
Business vehicles aren't covered. Any accident involving an employee driving to a job site, making a delivery, or using a company truck is excluded. Commercial auto covers this.
Your own property isn't covered. GL covers damage you cause to someone else's property. If your office floods and you lose equipment, that's commercial property insurance.
How GL Policy Limits Work
Every GL policy has two main numbers: the per-occurrence limit and the aggregate limit.
The per-occurrence limit is the maximum the insurer pays for any single claim. The aggregate is the ceiling across all claims in the policy period, typically 12 months. The most common structure for small businesses is $1 million per occurrence and $2 million aggregate. Once the aggregate is exhausted, the policy stops paying until renewal.
That matters more than it sounds. Multiple smaller claims in a single year can drain an aggregate faster than one large claim. If your operation has high claim frequency (construction, hospitality, retail), you may need higher limits or excess liability coverage layered on top. The Insurance Services Office (ISO), which publishes the standard CGL form used by most carriers, structures the policy so defense costs also draw from the limit, meaning a protracted legal fight eats into what's left for the actual judgment.
Do You Need More Than General Liability?
For most businesses, GL is the starting point, not the finish line.
If you have employees, you need workers comp. If you provide professional services, you need E&O. If you collect customer data or process payments online, you need cyber liability. If you own or lease commercial space, your landlord almost certainly requires GL, but may also require coverage for the contents. A business owners policy bundles GL and commercial property into one policy, which is typically more cost-effective than buying them separately.
Not sure what your operation actually needs? Speak to our team and we'll map your exposure and flag what's missing before you find out at claim time.