What Are the Risks of Not Having General Liability Coverage?

Legal fees and settlement costs can add up quickly if you don’t have business insurance. Without general liability coverage, your business’ financial future is at risk if an accident happens during normal operations. Even during normal business operations, your business is at risk for being sued due to a third-party bodily injury, third-party property damage, libel or slander — even if your business is not at fault.

What Does General Liability Insurance Cover?

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Key Takeaways

General liability insurance protects you from claims that your business caused injuries or damages to someone else.
This coverage can help pay for the cost of property damage or bodily injury claims, plus any associated legal fees, judgments and settlements. Without it, you’d have to pay out of pocket for these costs.
Having general liability coverage is typically not a legal requirement by state law but may be required by lease agreements or contracts.

What Is General Liability Insurance Coverage?

General liability, also known as commercial general liability or business liability insurance, is a type of small business insurance that can help protect your business from third-party claims. General liability insurance protects you from claims of:

Bodily injuries
Property damage
Personal and advertising injury, like libel or slander
Copyright infringement
Reputational harm

General liability coverage, by definition, also helps financially protect your business if you’re sued in a liability case. Your commercial general liability policy can help pay your legal fees and settlement costs.

Without general liability insurance coverage, your business would have to pay out of pocket for costly claims.

What Does General Liability Business Insurance Cover?

General liability insurance helps cover claims that can come up during normal business operations, such as:

Bodily Injury

General liability coverage can help pay for medical expenses associated with a physical injury that your business may have caused, like a customer slip and fall.

Property Damage

If an employee’s mistake damages someone else’s property, like breaking a client’s windows while working at their home, general liability insurance can help. This coverage can help pay the repair or replacement costs to fix the windows.

Personal Injury

General liability can help pay for your legal defense costs if your business is sued for personal injury that isn’t physical, like libel or slander.

General Liability Coverage Examples

Examples of general liability insurance coverages include:

Product liability coverage to help protect your business from claims that a product you made or sold caused bodily injury or property damage to someone else’s belongings.¹ We offer product liability insurance as a part of your general liability insurance policy.
Product recall insurance to help you manage a product recall and protect you from the financial impacts. Product recall insurance is an endorsement you can add to your business insurance policy.
Contractual liability coverage that can be added to your general liability insurance policy. Contractual liability insurance coverage helps cover claims related to contract issues.

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What Costs Does General Liability Insurance Cover?

General liability insurance helps cover:

Costs for property damage claims against your business
Medical expenses if a customer gets injured at your business
● Administrative costs to handle covered claims
Court costs, judgments and settlements for covered claims

How Much Coverage Does a Typical General Liability Policy Provide?

Your general business liability insurance can help pay for claims up to your coverage limits, sometimes referred to as your per-occurrence limit and your general aggregate limit.

Per-occurrence limit is the maximum amount of money that an insurance company will pay for any one claim. For example, if you have a GLI policy with a $1 million per-occurrence limit and a $2 million general aggregate limit, and you file a claim valued at $1.1 million, your insurance would pay the $1 million because of the occurrence, and your business would likely pay the remaining $100,000. The remaining amount left in your policy period then decreases from $2 million to $1 million.
General aggregate limit, sometimes called the “aggregate limit of liability,” is the maximum amount of money your insurance company will pay out for claims during a policy period. So, if you have a $1 million aggregate limit on your general liability insurance policy, your insurance will pay for claims up to the maximum amount of $1 million during that specific policy term.

Tip:

Your general liability policy has a limit for each claim you’ll file and a total limit your insurance company will pay for all claims in a year.

What Is Not Covered by General Liability Insurance?

General liability insurance doesn’t cover losses resulting from preventable risks, subcontractor actions or intentional wrongful acts. You may need additional insurance coverage to give your business more protection.

A general liability insurance policy won’t help your business with:

Commercial auto accidents that you or your employees cause while driving for work. A commercial auto insurance policy can help you cover the cost of damages. If your small business doesn’t have company-owned vehicles, hired and non-owned auto coverage could help, too. Be aware that many states require certain types and amounts of auto coverage, like bodily injury liability coverage or property damage liability coverage.
Employee injuries or illnesses due to their work. Workers’ compensation insurance gives your employees benefits to help them recover from a work-related injury or illness. For example, it can help pay an employee’s medical bills and ongoing care expenses.
Damage to your own business property. You’ll need to get a commercial property insurance policy to help protect your owned or rented building and business equipment.
Mistakes or errors in the professional services given to customers. Professional liability insurance can help cover your legal costs if a client sues you for a mistake in the services provided, such as bad advice given to a client or faulty workmanship.
Claims that cost more than your liability limits. You’ll need a commercial umbrella insurance policy for expensive claims. This extends the limits of certain liability insurance policies.
Illegal acts or wrongdoing. Errors that you or your employees made purposefully can result in your business being held legally responsible.

The Dangers of Not Having General Liability Insurance

Not having coverage could significantly hurt your business financially, risking the livelihood you’ve worked hard to build.

If someone files a claim against your business:

You’ll need legal counsel, which can cost between $100 per hour to $500 per hour.²
You may need to spend thousands of dollars, even if the lawsuit is dropped.

When you add the cost of administrative work, attorney fees and any settlements or judgments, your business could face a bill totaling hundreds of thousands of dollars. The right general liability insurance policy can help your business cover these costs.

You may also find that business partners will expect you to have the minimum coverage they require before agreeing to work with you. They want to make sure your business can survive a liability claim and continue to do what they hired you to do. So, they may ask you to provide proof of insurance, known as a certificate of liability insurance.

business owner protected by knowing what is general liability

Get the Right Liability Insurance for Your Business

Many insurance companies offer general liability, but few specialize in small businesses. With over 200 years of insurance experience and more than 1.5 million small business owners served, we’re here for you too. Our team of specialists are ready to help you find the right liability coverage for your business.

Get a quote today.

Frequently Asked Questions About General Liability Insurance Coverage

What Is General Liability?

What does general liability cover? Read on to learn more about general liability insurance coverage definitions, applications and limitations.

Is General Liability Insurance Required by Law?

Typically, states don’t define general liability insurance as a legal requirement, but your business might be required to purchase insurance as part of a lease agreement or contract. It’s a good idea to have general liability insurance because without it, you’d have to pay out of pocket for costly claims that could put you out of business.

What Does a General Liability Policy Cover?

General liability insurance can help cover claims that your business may have caused:

Third-party bodily injury
Third-party property damage
Reputational harm
Advertising injury

What Damages Does Commercial General Liability (CGL) Cover?

A commercial general liability insurance policy can help cover these types of claims:

Third-party bodily injury: If a customer gets hurt after slipping and falling in your store, they can sue your business. Your GLI policy includes bodily injury liability coverage, so it can help pay their medical bills.
Third-party property damage: Property damage arising from everyday business activities is included in your GLI policy. This coverage can help pay for repair or replacement costs if your business damages someone else’s belongings.
Reputational harm: A client can sue your business for libel or slander because of something you or your employees said. If this happens, general liability coverage can help pay your legal costs to defend your business.
Advertising injury: General liability coverage can help your business if you get sued for copyright infringement. For example, a photographer can sue you if you use their photo in your ads without permission.

Does General Liability Insurance Cover Theft?

General liability insurance coverages don’t include theft or burglary but a commercial property insurance policy does. Commercial property insurance helps protect physical assets, like your business location, equipment, tools, inventory, furniture and personal property.

Is General Liability Worth It?

A general liability policy adds an extra layer of financial protection if your business is sued because of an unexpected accident. Accidents can happen during normal business situations. If you or your employees meet with clients, work off-property or advertise for your business, you face risks every day. Without general liability insurance coverage, you’d have to cover the costs for claims and lawsuits out of your own pocket.

What Are the Risks of Not Having General Liability Insurance?

Legal fees and settlement costs can add up quickly if you don’t have business insurance. Without general liability coverage, your business’ financial future is at risk if an accident happens on the job. Even during normal business operations, your business could be sued due to third-party bodily injuries, third-party property damage, libel or slander — even if your business is not at fault.