Aug 11, 2025
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Key Takeaways
- Our research shows that commercial general liability insurance is the most common type of business insurance for small businesses.
- General liability insurance covers bodily injury, property damage and related medical expenses caused by your operations or employees.
- This kind of insurance can also cover personal and advertising injury, such as lawsuits against you for copyright infringement.
As a small business owner, the dream of entrepreneurship can quickly turn into a nightmare if unforeseen legal challenges arise. Commercial general liability insurance can be crucial for small business owners seeking protection from financial losses due to lawsuits. A limited liability company or corporation status can protect your personal property, but that’s often not enough to cover other unexpected costs. General liability coverage can shield you from personal injury and property damage claims, in addition to many other costly incidents.
We at the MarketWatch Guides team have researched business insurance, interviewed experts and surveyed more than 350 small business owners to compile everything you should know before choosing a policy for your business.
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What Is General Liability?
Commercial general liability insurance is a type of business insurance that covers you and your business from financial losses due to personal injury, property damage, medical payments and certain lawsuits.
CGL is available on its own or as part of a bundled business owner’s policy. We found during our research that it’s the most common type of business insurance. Policies differ, but most general liability insurance offers broad protection for accidents or other issues that occur on your property.
Tyler Peterson, Head of Professional Risks at Hiscox, shared the following with MarketWatch Guides in an interview:
“Commercial general liability has become a foundational coverage largely because of the fact that it is most commonly required under contract for any profession, either between a client and a service provider, or it’s also required to rent space. If you’re entering into a lease, the landlord’s likely going to require that you have CGL coverage. Depending on if you end up providing services outside of your own premises or location, in order to get on location or visit a third-party site, often they’re going to require that you carry CGL as well.”
What Does General Liability Insurance Cover?
General liability insurance typically covers three major types of claims, along with other administrative or court costs. Most policies include coverage for premises liability (incidents related to your physical business location) and business operational liability (incidents related to the work you do).
You may also be able to opt for excess liability coverage, which can cover claims that exceed your base CGL policy, but this is not automatically included.
Bodily Injury and Property Damage
When thinking about general liability insurance, we often recognize it as essential coverage for bodily harm or property damage that might occur on our business premises or as a result of our work. For example, imagine you own a restaurant and a customer slips on a wet floor, resulting in an injury. If this customer sues, the damages could be covered under CGL. If you own a roofing business and an employee accidentally breaks a customer’s window on the job, general liability can cover this as property damage.
Personal and Advertising Injury
Personal injury coverage can protect your business if you’re sued for non-physical damage, such as copyright infringement, slander or libel. CGL will cover defense costs in the case of a lawsuit. For example, if you make a claim about a competitor in an advertisement and the competitor sues for slander, CGL will cover the defense costs.
Medical Payments
Commercial general liability insurance is essential for covering medical costs for customers who may be injured at your business. This is usually considered “no-fault” coverage, meaning the insurance company will pay for emergency medical expenses regardless of whether or not the injury was the business’s fault. If someone is hurt on the premises of your business, regardless of whether you rent or own the space, you should be able to get medical expenses covered through your CGL policy.
When you purchase commercial general liability insurance, you’ll either have a claims-made policy or an occurrence policy.
- A claims-made policy covers claims you make during your policy period. Both the loss event and the claim must be made during your active coverage.
- An occurrence policy covers events that happen during your policy period, regardless of when you make a claim. This means you could make a claim for a loss that occurred during your policy period, even if your coverage has since expired.
For instance, let’s say a customer gets injured on your business premises while your general liability policy is active. However, the customer waits several months to sue for damages, and your coverage has lapsed by the time they’ve filed. Under an occurrence policy, you’d still be covered for the injury because it occurred during your coverage period, even if you file the claim later. Occurrence policies tend to be more expensive because you can file claims retroactively — even if your coverage period has passed.
What Does General Liability Insurance Not Cover?
We learned from our conversations with dozens of insurance agents that each insurance company is different, and all insurance policies have exclusions. It’s important to read through your general liability insurance policy to understand exactly what’s included so you aren’t caught off guard later if a certain incident is excluded from coverage. It’s also good to remember that not all insurance companies offer coverage in all 50 states.
- Theft: General liability does not cover stolen property or other crimes. You’ll need to look into commercial crime insurance to protect against theft or fraud.
- Employee injuries and illness: Workers’ compensation insurance covers work-related injuries or illnesses for employees. CGL is designed to protect against lawsuits from injuries that your business or employees may cause.
- Auto accidents: You’ll need a commercial auto insurance policy to protect vehicles for your business.
- Professional mistakes: If your business offers professional services, professional liability insurance coverage is your best bet to protect yourself in the case of a lawsuit for mistakes or malpractice.
- Commercial property: You’ll likely need commercial property insurance to protect business property in addition to a general liability policy. General liability is designed for property damage that you or your employees cause to other people, not for property you own or rent.
How General Liability Insurance Works
When you have general liability insurance, your insurance provider will cover certain incidents that you would otherwise need to pay for, which can help you avoid taking a major financial hit. If the unexpected happens, you’ll contact your insurance provider to file a claim.
The insurance company will typically investigate the claim by reviewing your report and any evidence you can provide, such as photos and videos. They’ll use this information to decide whether to pay the claim or deny it. If your policy includes coverage for the incident, and your claim is accepted, most insurance companies will either send you a check or pay those impacted directly on your behalf.
What Impacts the Cost of General Liability Insurance?
There are many factors that determine how much a particular business will pay for business liability insurance. General liability insurance costs are difficult to estimate, and you’ll likely need to get a specific general liability insurance quote. We found that insurance costs can depend on:
- Industry type and general business risks: Insurance companies consider the various risk factors related to your industry or the type of business you run.
- Location: If you’re in a highly populated city or an area prone to certain natural disasters, you may need to pay more for CGL.
- Business age: The number of years you’ve been in business can impact your rates. New companies may see higher rates than long-time companies.
- Coverage limits: No two CGL insurance policies are the same. The more that’s covered by your insurance, the higher your costs will likely be.
- History of claims: If you have no previous insurance or liability claims, you’ll likely end up paying less for small business insurance.
To learn more about the cost of commercial general liability insurance, the MarketWatch Guides team interviewed Erika Tortorici, founder and owner of Optimum Insurance Solutions. She said:
“Several factors influence the cost of a general liability policy, including your business’s location, sales volume, and industry classification. Higher sales often mean greater exposure to risk, and certain class codes carry more risk than others. Past claims also play a role — if a company has a history of losses, that can impact pricing.
“Costs vary significantly by industry because each business is assigned a class code that reflects its risk level. The higher the risk, the higher the premium. For example, a contractor will typically pay more than a graphic designer due to the nature of their work.”
Why Small Businesses Get General Liability Insurance
Small business owners understand that sticking to a budget and keeping costs low can be crucial to success, especially in the first few years of entrepreneurship. A large accident or lawsuit could be so costly that it puts you out of business or derails your business plan. General liability insurance can help protect you from the worst-case scenario, giving you the peace of mind needed to focus on growing your business.
Additionally, while general liability insurance is not usually required by law, there are some exceptions when it may be necessary. Our analysis indicates that, in many cases, your business needs general liability insurance to:
- Qualify for certain professional licenses
- Sign a lease for commercial space
- Sign a contract with a larger company
Even if this isn’t the case, it’s recommended that small businesses insure anything they wouldn’t be able to pay for out of pocket, making general liability an easy solution to hedge against unexpected legal costs.
The Bottom Line
Commercial general liability insurance is the most common type of business insurance, and it’s an important consideration for small business owners. CGL covers bodily injury, property damage, personal injury, advertising injury and medical payments to shield you from lawsuits that could potentially put you out of business. While general liability insurance isn’t typically required by law, we believe it’s a smart move to insure your business so you can stay focused on your goals.
Frequently Asked Questions
Below are some frequently asked questions about general liability insurance.
Forming an LLC or corporation doesn’t fully protect you from unforeseen lawsuits or medical expenses. General liability business insurance can protect your business from financial losses due to mistakes, accidents or injuries.
General liability insurance typically covers more than public liability. Public liability insurance covers bodily injury or property damage sustained by the public in a physical business location. General liability policies cover the same, with added coverage for personal injury, medical expenses and more. It’s a broader level of protection with fewer exclusions than public liability.
In most cases, yes. Commercial general liability insurance is designed to cover bodily injury or property damage that occurs on the premises due to your business operations. You may need to make sure your policy includes “product” or “operations” coverage for incidents that occur outside of your business premises as a result of products or completed work. This can be particularly useful for businesses that don’t operate out of a set storefront, like home repair companies or event planning businesses.
Most businesses will pay an average of $500 per year for commercial general liability insurance, though policies can cost anywhere up to $5,000 annually. The amount you pay for general liability insurance depends on many factors, such as your industry, risk levels, years in business and location.
In most cases, no. General liability insurance is typically not required by state law, but it’s highly recommended for businesses to protect themselves from costly accidents or lawsuits. CGL insurance may be necessary to qualify for professional licenses, rent commercial space or sign contracts with larger companies. It’s always best to double-check the requirements for your state and industry.
*Data accurate at time of publication.
