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What Does General Liability Insurance Cover & Who Needs It?

  • Business Insurance
  • Article
  • 6 min. Read
  • Last Updated: 04/18/2024

a landscaper is protected by general liability insurance

Table of Contents

As a small business owner, you face various threats every day. One lawsuit could devastate your company financially — a customer slip and fall claim can easily add up to $30,000. General liability insurance coverage can help to protect your business.

General liability coverage is a vital part of your company's defense strategy. Consider this: You can be sued even if your business didn't do anything wrong. Without commercial general liability insurance, legal fees and settlements could expose you to potentially crippling financial risks.

What Is General Liability Insurance?

General liability insurance, also known as commercial general liability (CGL), helps shield you from common risks arising from everyday business activities. It protects against injuries on your premises and damage resulting from your operations. CGL insurance for small businesses even covers allegations of slander or libel.

What Does General Liability Insurance Cover?

General liability insurance is comprehensive but specific. It's designed to protect your business from financial losses due to third-party claims of bodily injury, property damage, and personal and advertising injury. Coverage extends beyond your business location to include a client's location or anywhere your business operates.

But specifically, what does general liability insurance cover for small businesses? Imagine a customer visiting your retail store and accidentally slipping on a wet floor, breaking their arm. Or an employee accidentally damaging a client's expensive outdoor sculpture while providing landscaping services. In both cases, general liability insurance coverage can pay for medical expenses, repair costs, and potential legal fees.

Critical areas of general liability coverage include:

  • Bodily injury: Medical expenses, ambulance fees, and lost wages for someone your business injured or a third party injured on your business property.
  • Property damage: Repairs or replacements for damage to someone else's property.
  • Libel and slander: Legal costs and settlements if your business is accused of harming another person's business or reputation.
  • Copyright infringement: Legal defense costs and settlements if your business uses copyrighted material without permission.

What Is NOT Covered by General Liability Insurance?

General liability insurance provides broad coverage but doesn't include every possible scenario. Understanding the limitations of what it doesn't cover is essential to avoid gaps in coverage that could leave your business vulnerable. Here's what general liability insurance doesn't cover:

  • Commercial auto accidents: You'll need separate auto insurance to protect your business from accidents while driving business vehicles.
  • Employee work-related injuries: Workers' compensation insurance covers employee injuries and illnesses while on the job, and it's required in most states.
  • Business property damage: Damage to your property, such as your building, equipment, or inventory, requires a commercial property insurance policy.
  • Professional errors: Errors and omissions insurance is a type of professional liability insurance that protects against mistakes that cause clients to suffer financial losses.
  • Claims that exceed liability limits: Every insurance policy has a limit on how much it will pay out for a covered claim. You're responsible for paying the difference out of pocket unless you have commercial umbrella insurance that can step in to help.
  • Data breaches and cyber attacks: Cyber liability insurance is a separate policy that helps protect your business from data and technology-related incidents.

Who Needs General Liability Insurance?

Nearly every business can benefit from commercial general liability insurance. It's particularly beneficial for companies with public interaction, social media promotion, operations at third-party locations (like clients' homes), or temporary or contract workers.

But who needs general liability insurance? Businesses commonly needing this coverage include contractors, accountants, lawyers, landscapers, marketing agencies, retailers, restaurants, and service-based businesses.

Is General Liability Insurance Required by Law?

General liability insurance typically isn't required by law like workers’ comp often is. However, coverage may become necessary for business licenses, certifications, or contracts. Its absence can be a deal-breaker in many professional or commercial lease agreements.

How Much General Liability Insurance Do You Need?

General liability policies have different coverage limits, and the best coverage limit depends on your business exposure. If you're asking, "How much general liability insurance do I need," know that higher limits mean more protection and higher premiums.

Depending on your industry and risks, you might consider getting a Business Owner's Policy (BOP) to bundle general liability with commercial property insurance. For small businesses, it's convenient and often cheaper than buying separately.

Can You Get General Liability Insurance as an Individual?

Yes, you can get general liability insurance coverage as an individual — it isn't just for big businesses. You can get coverage even without a business license if you're a freelancer, do gig work, or operate a limited liability company (LLC).

How To Get General Liability Insurance

Besides knowing what general liability insurance covers, you must also learn how to get it. Although it may initially seem tedious, buying coverage is a straightforward process.

Gather Necessary Information and Documents

Before shopping for general liability coverage, gather all the relevant information to get more accurate quotes. The documentation you should have readily available includes, but is not limited to:

  • Owner contact information
  • How long you've been in business
  • Number of employees on your payroll
  • Detailed description of your business operations or a business website
  • Estimated business revenue for the current year
  • Purchase agreement or lease for your business location
  • Prior business insurance coverage information if available

Assess the Risks of Your Business

Every industry has different risks. Consider the potential hazards that could affect your operations, from accidents to natural disasters or lawsuits. For example, you might need hazard insurance (also known as commercial property insurance) to protect your property from seasonal risks like wildfires or hailstorms, or a commercial umbrella policy to give you higher policy limits if your work involves frequent interactions with expensive client properties.

Find a Reputable Insurance Provider

Not every insurance company specializes in small business coverage. It's helpful to work with a knowledgeable and experienced commercial insurance agent who can match you with the right policy for your company. Keep in mind that agents typically receive commissions for selling policies, so research reputable insurance agencies that will prioritize your needs.

Compare Prices and Benefits

Your next step is to compare general liability insurance quotes from multiple insurance providers. Prices and policy terms can vary significantly from one provider to the next, so reviewing and comparing rates, coverages, deductibles, and any additional benefits or services is crucial.

Choose a Policy That Meets Your Needs

After you've gathered your information and quotes, it's time to choose a policy that fits your company's risk profile. Review the policy and premium details and ask questions if there's anything you don't understand before purchasing coverage.

Where To Get General Liability Insurance

Insurance is a competitive industry. It's helpful to check quotes from several providers before settling on a general liability coverage policy. You can connect with an independent insurance agent or get provider recommendations from trade organizations.

Paychex tailors general liability insurance coverage to the unique needs of businesses. Our licensed insurance agents can help you review insurance coverages and customize the policy to meet your needs and budget.

How Much Does General Liability Insurance Cost?

Speaking of your budget, it's essential to select a policy that protects you from potential hazards and is affordable. How much is general liability insurance for small businesses? Generally, the general liability insurance cost ranges from $40 to $70 per month.

However, premiums depend on a few factors, including but not limited to:

  • Annual sales and payroll estimates
  • Type of business and industry risks
  • Years in operation and claims history
  • Location and size of the business
  • Desired coverage limits and deductibles

Getting quotes from multiple insurance companies is an excellent strategy for controlling costs. It can help you find the best price for your coverage needs.

Protect Your Business With General Liability Insurance

General liability insurance coverage is essential for most small businesses. Without key policies in place, a single lawsuit could jeopardize your financial stability and the future of your operations. Paychex specializes in businesses of all sizes and tailors business insurance to meet your unique hazards. You'll benefit from our expertise and resources while securing the right general liability coverage for your business.

Insurance is sold and serviced by Paychex Insurance Agency, Inc., 225 Kenneth Drive, Rochester, NY 14623. CA license #0C28207


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* This content is for educational purposes only, is not intended to provide specific legal advice, and should not be used as a substitute for the legal advice of a qualified attorney or other professional. The information may not reflect the most current legal developments, may be changed without notice and is not guaranteed to be complete, correct, or up-to-date.

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