General Liability Insurance: What Does It Cover?

General liability insurance might not be something small business owners think about every day, but when a customer slips, a lawsuit lands on your desk, or a mistake damages someone’s property, it suddenly becomes the most important thing in the world. Whether you run a bakery, a consulting firm, or a landscaping service, having general liability insurance in place is often the only thing standing between your business and serious financial trouble.

In this guide, we’ll break down what general liability insurance covers, what it doesn’t, and why nearly every small business in the U.S. should consider it essential.

What Is General Liability Insurance?

General liability insurance (often shortened to GLI) is a core business policy that protects you from the most common third-party risks: bodily injuries, property damage, legal fees, and certain personal or advertising-related claims.

It’s called “general” for a reason: this coverage is broad and flexible. It’s designed to catch the most likely (and most expensive) types of risks that small businesses face daily.

You don’t need to own a brick-and-mortar store to get this protection. Even if you operate from home or work remotely, GLI can be critical, especially if you interact with clients, rent space, or run marketing campaigns.

What Does General Liability Insurance Cover?

1. Bodily Injury to Non-Employees

If someone gets hurt on your business property or due to your business activities, general liability insurance covers:

• Medical bills

• Ambulance services

• Potential legal claims or settlements

Real-world example: A customer slips on a wet entry mat in your retail store and breaks their ankle. GLI pays for their treatment and protects you if they sue for negligence.

2. Damage to Someone Else’s Property

If your work causes damage to another person’s physical property, GLI can help cover the repair or replacement costs.

Example: You’re an electrician, and while on-site at a client’s home, you accidentally start a small electrical fire. General liability insurance will pay for the damages.

3. Legal Defense and Court Costs

Even unfounded lawsuits can cost thousands to defend. GLI helps pay:

• Attorney fees

• Court filing costs

• Judgment or settlement amounts

Example: A past client claims your service caused financial loss and takes you to court. Even if you win the case, your GLI covers the legal expenses.

4. Personal and Advertising Injury

This part of GLI covers certain non-physical harm caused by your business, like:

• Libel or slander

• Defamation

• Misuse of a competitor’s slogan or copyrighted content

• Wrongful eviction or invasion of privacy

Example: You accidentally use another brand’s tagline in a Facebook ad. They sue for copyright infringement, and your GLI helps with the legal costs.

5. Product Liability (Sometimes Included)

Some general liability policies include limited product liability coverage. This coverage is helpful if a product you sell or distribute causes harm.

Example: A customer claims they became ill after eating a snack from your gourmet food store. GLI could help pay for their medical bills and any related legal action.

What Isn’t Covered by General Liability Insurance?

While it covers many risks, general liability insurance doesn’t cover everything. These common situations require different types of business insurance:

Employee Injuries

You’ll need workers’ compensation insurance to cover employee injuries, not GLI.

Mistakes in Professional Services

Claims related to bad advice, errors, or negligence in your services are covered under professional liability insurance, also known as Errors and Omissions (E&O).

Damage to Your Own Property

GLI does not protect your building, tools, or equipment. That’s what commercial property insurance is for.

Vehicle-Related Accidents

If you or an employee causes an accident while driving for business, only commercial auto insurance will cover it.

Intentional Damage or Criminal Acts

General liability insurance won’t pay for damage or injury caused on purpose.

Why Small Businesses Need General Liability Insurance

Some business owners think insurance is only for big companies or high-risk industries. But in reality, even a minor accident can lead to a major lawsuit.

Here’s why GLI is worth every penny:

• Legal costs are high. Even a simple slip-and-fall claim can result in $20,000+ in legal and settlement costs.

• Clients and landlords may require it. Many contracts demand proof of GLI before working with you or renting space.

• It protects your brand. Showing clients that you’re insured builds trust and professionalism.

• It’s affordable: GLI is one of the most cost-effective ways to protect your business.

Who Should Get General Liability Insurance?

If you answer “yes” to any of these, you likely need general liability insurance:

• Do customers or clients visit your location?

• Do you work at client sites?

• Do you advertise your services?

• Do you manufacture, sell, or distribute physical products?

• Are you a freelancer or contractor with public exposure?

Common Businesses That Need GLI

Even home-based and online businesses should consider it. Your homeowner’s policy won’t cover business-related incidents.

How Much Does General Liability Insurance Cost?

Costs vary by industry, location, business size, and claims history, but here are some rough estimates:

Most small businesses opt for

• $1 million per occurrence

• $2 million aggregate limit

You can also bundle GLI with other coverage in a Business Owner’s Policy (BOP), which typically reduces your premium.

How to Buy General Liability Insurance (Step-by-Step)

1. Assess your risk exposure
   Think about how and where you interact with the public.

2. Gather basic business details
   Include your revenue, employee count, location, and nature of services.

3. Compare quotes from providers
   Some popular options include

   • Next Insurance

   • Hiscox

   • Thimble

   • The Hartford

   • Simply Business

4. Review limits and exclusions
   Don’t just pick the cheapest option. Make sure the coverage fits your needs.

5. Purchase and receive your certificate of insurance (COI)
   Most insurers offer instant digital access to your policy documents.

Real Examples of Claims Covered by GLI

Small Coffee Shop Slip

A customer slipped on a freshly mopped floor and fractured their wrist. The business’s GLI paid over $9,000 in medical and legal fees.

Cleaning Business Mishap

An employee of a cleaning company accidentally knocked over an antique vase worth $5,000. GLI covered the replacement.

Online Store Copyright Violation

A small eCommerce business used a stock photo without proper licensing. The original creator sued. GLI paid the legal costs and a settlement.

Frequently Asked Questions (FAQs)

Q: Is general liability insurance legally required?

A: Not by law in most states, but it’s often contractually required by landlords, clients, and partners.

Q: How is it different from professional liability insurance?

A: GLI covers physical and advertising-related claims; professional liability covers service errors or advice gone wrong.

Q: Is it useful for an online-only business?

A: Yes, especially if you advertise, sell products, or store customer data.

Q: Can I get coverage the same day?

A: Yes! Many insurers now offer instant coverage for freelancers and small businesses.