General Liability
Plain English
General liability insurance pays when your business is held responsible for injuring someone, damaging their property, or for personal and advertising injury such as libel, up to the policy limits. It covers legal defense too. It doesn't cover professional mistakes, broken contracts, your own property, auto accidents or employee injuries.
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Definition
General liability insurance covers claims that a business's operations, products, or premises caused bodily injury, property damage, or certain types of advertising or personal injury to a third party. It typically pays for the injured party's medical bills or property repair costs, as well as the business's legal defense costs, up to the policy's limits, even if the claim is ultimately found to be without merit. It's often the foundational liability coverage for a small business, frequently bundled with property coverage into a business owners policy.
Why It Matters
Almost any business that interacts with the public, has a physical location, or handles other people's property faces some risk of a liability claim, and a single serious injury claim can cost far more than most small businesses could absorb without insurance. Many landlords and clients also require proof of general liability coverage before signing a lease or contract.
Real-World Example
Say a customer trips on a loose mat in a store and breaks a wrist, with $18,000 in medical bills and lost wages. The store's general liability policy pays the claim and the store's legal costs, up to the per- occurrence limit. If the same store missed a delivery deadline in a contract, general liability generally wouldn't pay those damages.
Personal vs. Commercial
For businesses: Many contracts, leases, and vendor agreements set specific minimum general liability limits as a condition of doing business, so it's worth checking those requirements before assuming a standard policy is sufficient.
Common Misconceptions
- People sometimes assume general liability covers employee injuries, when workplace injuries to employees are typically handled by workers' compensation instead.
- It's sometimes assumed general liability covers professional mistakes like bad advice or a design error, when those are typically handled by a separate errors and omissions policy.
- Some think general liability protects the business's own property, when that's typically the role of commercial property insurance, not liability coverage.
- People sometimes believe a home-based business is automatically covered under general liability just because it's small, when homeowners policies commonly exclude business-related liability.
Key Takeaways
- General liability covers third-party bodily injury, property damage, and certain advertising-related claims tied to your business.
- It typically also covers legal defense costs, even for claims that turn out to be unfounded.
- It generally doesn't cover employee injuries or professional service mistakes, which need separate coverage.
- Many leases, contracts, and client agreements require proof of general liability coverage before work can begin.
Frequently Asked Questions
What is general liability insurance?
Business coverage for bodily injury, property damage, and personal and advertising injury that your business is legally responsible for.
What doesn't general liability cover?
Typically professional errors (E&O), contract penalties, your own property, auto accidents and employee injuries (workers' comp).
What are general liability limits?
Usually a per-occurrence limit and an aggregate limit, which caps the total for the policy period.
Does general liability cover breach of contract?
Generally not. The Texas regulator's example: damages for missing a contract deadline are generally excluded.
Related Terms
Related Coverages
- General Liability Insurance
- Business Owners Policy
- Umbrella Insurance
Related Scenarios
Explore the rest of the Liability category.
Browse Liability terms →Sources
The factual claims on this page were checked against these sources. Rules and figures change, so check the source itself if you need to confirm the current version.
- iii.orgInsuring your business: liability insurance · Insurance Information Institute (Triple-I)
- tdi.texas.govCommercial general liability insurance · Texas Department of Insurance
- iii.orgInsuring your home business · Insurance Information Institute (Triple-I)
Educational information, not advice: This page is for general education only, not legal, financial, or insurance advice. Actual coverage, discounts, and requirements depend on your policy’s wording, your insurer, and the laws of your state. Confirm specifics with your own insurer or a licensed agent before making a decision. Insurpedia does not sell insurance and does not recommend specific insurers.