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The Ultimate Guide to Commercial General Liability Insurance​


Buying business liability coverage is one of the most important steps you can take to safeguard your company and personal assets in the event of any legal action that could be taken against you.

With so many types of commercial liability coverage to choose from, it’s important to understand what general liability coverage is, who needs it, and what it will and will not cover. In this guide, we aim to address all of these questions and more. 

Quick References


What is general liability insurance?

Commercial General Liability Insurance (CGL) is a type of business insurance that covers most of the common risks a business will face. This can include third-party property damage, third-party injury, personal injury, and advertising injury. It excludes other such risks, such as professional liability, pollution liability, liquor liability, and D&O liabilities.


Do I need general liability insurance?

It’s a common question, and there are many reasons why you need to buy commercial general liability coverage for your business. The most prominent of all is that a CGL policy can help to protect you from costly insurance claims and helps to protect your professional and personal assets. As a business owner, you could be held legally responsible should someone be injured or has their property damaged while on your premises or as a result of something you did.

Some of your clients will also insist you have a certificate of insurance before you can start working with them, and if you tender for contracts, you will often need to upload proof of this insurance as part of your bid.

It can help you in the event an issue was to arise from a number of situations, and we have outlined a few examples of these issues for you here.

  • Business advertising
  • Client meetings
  • Working with others’ property
  • Client representation by you or your employees
  • Using a third-party location for your business activities

This is not an exhaustive list by any means. However, we will discuss what is and is not covered by a commercial general liability policy later in this post.

How much does general liability insurance cost?

There are a number of factors that impact the cost of buying commercial general liability insurance for your business. Here is a list of the factors that could impact the cost of buying CGL coverage for your company.

  • The type of business you operate
  • The industry you work in
  • The type of clients and contracts you work with
  • The number of years of experience you have in your chosen field
  • The location of your business
  • The size of your business
  • The number of people you employ
  • Your insurance claims history
  • Coverage limitations and deductibles

There are many moving parts with commercial general liability coverage, and the amount of coverage you buy will impact the cost of a policy. It’s always best to speak with a local commercial insurance expert to get guidance and have any questions answered directly. They will be able to present you with a range of insurance options to suit your needs and your budget.

What does commercial general liability insurance cover?

As one of the most important types of commercial insurance you can buy for your business, CGL covers a number of key liabilities that almost every business will face on a daily basis and as part of their everyday operations. Here is a quick summary of the specific things you are covered for as part of a general liability policy.

  • Third-Party Property Damage

If either you or one of your staff causes damage to another person’s property. This coverage could help you cover the cost of a repair or replacement to that property.

  • Third-Party Bodily Injury

If you face legal action because somebody was injured while on your property.

  • Advertising Injury

If another business was to make a claim that your advertising is too similar to their own, and an insurance claim unfolds, this coverage could help with any associated costs.

  • Reputational Harm

If you face legal action for slander or libel, then a commercial general liability insurance policy can help to cover any associated legal costs.

Generally speaking, if a claim is made against your company, a CGL can help you to cover the costs for legal expenses, including settlements or judgments.

What does commercial general liability insurance not cover?

All insurers will offer slightly different terms of coverage, but generally speaking, a commercial general liability policy will not cover these situations:

  • Professional liabilities
  • Damage to your commercial property (but commercial property coverage can help with this)
  • Work-related injuries or illnesses for your employees
  • Employee theft of company property
  • Punitive damages
  • Intentional acts
  • Auto accidents
  • Workmanship

Will a commercial general liability insurance policy cover theft?

Although many people believe that general liability coverage will cover thefts from their business, generally speaking, it will not. Business GL coverage is designed to cover third-party losses only, where your company is considered to be negligent in some way. Because theft is a first-party loss, it will not be covered.

Please note, that you can add coverage for acts of theft to your overall commercial insurance package. Talk with a local commercial insurance expert to find out how you can get business theft coverage.

Is Commercial General Liability Business Insurance a Legal Requirement?

The insurance requirements in the US will vary greatly between states, and for this reason, it’s important to check with a local commercial agent to get help in understanding your company’s legal insurance requirements. In most cases, you will find that while there is no legal requirement to buy commercial general liability coverage, there are many other compelling reasons to do so. However, if you work in a specific industry, such as construction, then you might find that you do have a legal obligation to buy commercial general liability coverage.

For instance, if you work with other businesses or on government contracts, then your customers and clients might insist you have a CGL policy in place before you can do business with them. Another reason is that most small to medium businesses will not have a reserve of money needed to survive a large liability claim, and by failing to buy general liability coverage for your business, you also place your personal assets at risk.

Do you need to buy business general liability coverage for an LLC?

Although an LLC business structure will give you a level of protection against personal liabilities, it will not typically protect you if someone files a lawsuit for the following reasons:

  1. You knowingly or unknowingly did something illegal
  2. You mixed your personal and business expenses
  3. You acted irresponsibly or negligently

The structure of an LLC does offer some protection, but your business can still be sued. You will need to hire your own lawyers and respond sufficiently to complaints. Buying commercial general liability insurance can help to safeguard your business from the financial impact of a third-party claim, and most insurance companies will also give you assistance for the legal side of things too.


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What is an additional insured on commercial general liability insurance?

It’s important to understand this term when you consider the best type of commercial insurance for your business, and here’s why. An additional insured can represent any company or individual that is added to your company’s general liability insurance policy. They are a named entity on your certificate of insurance, and while their coverage is not typically as extensive as the policy owners, there will still get significant protection. This protection could include coverage against any third-party lawsuits and defense coverage. It will usually only be in effect while the additional insured carries out services for the policyholder. 

Are there any benefits of being an additional insured?

Although an additional insured has fewer benefits than the main policyholder, and you cannot accrue any no claims discounts, you still get crucial insurance that will protect you against a number of risks.

Third-party lawsuits – As an additional insured on another person’s policy, you could be covered for certain third-party claims, such as property damage, bodily injury, and advertising injury.

Legal defense costs – If you face legal action over any work that was carried out on behalf of a client, then you will most likely find the policyholder’s coverage will be able to address this claim and any associated legal costs. This could include court costs, lawyer costs, and any settlement or judgment costs.

Do independent contractors need to buy commercial general liability insurance?

Just like any other type of business, an independent contractor will still face the risk of a lawsuit, and they will still be liable to cover damages. Here are the main reasons why contractors need to buy business general liability coverage:

  • A client may request it – If you are a contractor that works on government contracts or with other commercial partners, then you’ll most likely be asked to provide a certificate of insurance before you can do any work for them. Without this insurance in place, you could be held liable for any accidents caused by yourself or your work.
  • It gives you and your business protection – As a contractor, you still face the same risks and legal obligations as larger companies. There is also the same risk of a lawsuit, and commercial general liability insurance will help you cover the cost of legal fees and any resultant damages.
  • You might be legally required to buy CGL – There are some industries, such as construction, where you might find you are legally required to buy this insurance. Always check with a local commercial insurance agent what your local state laws advise.
How do independent contractors get commercial general liability coverage?

There are a couple of ways you can obtain general liability insurance as an independent contractor. 

  1. Buy your own commercial general liability policy

Or

  1. Your client can add you to their policy as an additional insured

Most commercial insurance agents will advocate having your own policy in place. Not only does this give you complete peace of mind, but it also means, that should you start working with another client, there is no need to ask them to add you to their policy. As we’ve already covered in this post, it might be a legal requirement, and it looks far more reassuring to potential clients that you have taken the adequate measures to put this in place.

Aside from this point, you might find that not all clients are willing to add you to their own commercial liability policy due to the costs involved.

Does a sole proprietor need to buy general liability insurance?

Yes. All businesses regardless of their size or sector should buy a commercial general liability policy. Even if you work from home, you will still face a number of liabilities in your work that a homeowner’s insurance policy will not cover.

What is the difference between general liability and professional liability coverage?

Commercial general liability and professional liability insurance both give you protection from business liabilities, but they cover different types of lawsuits. For this reason and depending on the type of work you do, you might find that you only need to buy a general liability policy. However, there is often much confusion between the two.

Here, we explain the differences between general and professional liability insurance coverage.

Commercial General Liability coverage will not protect you if you face a lawsuit for alleged professional mistakes or negligence. However, professional liability insurance will.

Professional Liability coverage will not protect you from third-party claims for property damage or personal injury. However, commercial liability coverage will.

How to find the best commercial general liability coverage?

If you’ve tried to search online for the best general liability coverage, you may have been overwhelmed by companies, aggregators, brokers, and agents all claiming to offer the best business liability insurance. So, how can you truly find the right company for your individual business needs?

The key to getting the best type of general liability coverage for your business is to make sure it is tailored to the individual needs of your company. Often, it isn’t just a case of looking for the prices for CGL coverage, and it will require you to take a deeper look at the policy, the terms, and the insurer themselves.

Here’s a couple of tips that can help you in your search.

#1 Use a local insurance agent

While it may seem tempting to try and find the best types of CGL online yourself, it can save a lot of time, money, and hassle by choosing to use an insurance agent instead. These insurance professionals have an incredible knowledge of the insurance market, and they will often have worked with other companies or contractors similar to yourself. They will be able to answer any of your questions, speak to relevant insurers on your behalf, and return to you with a number of pricing scenarios and policy options for you to choose from.

#2 Compare Policy Terms, Coverage Limits, and Deductibles

When you compare insurance policies from different providers, the key things to look at, aside from the price, are the coverage limits, exclusions, deductibles, and the key policy terms. If you get a quote for a commercial general liability policy that seems almost too good to be true, or significantly cheaper than the others, then you’ll need to dig a little deeper in order to fully understand what you are buying.

This is a prime example of a time when using a commercial insurance agent makes sense. However, if you’re confident with insurance documentation and have a keen eye for detail, it might easy to spot why one policy is much lower than the others.

Buying insurance on price alone isn’t always the best method of choosing your commercial liability coverage. So, make sure you ‘look under the hood’ of the policy itself before you commit to buying it.

#3 Ask for Recommendations

Finding a good deal on your commercial liability insurance is always easier when you receive a personal recommendation. If you know another business owner or somebody in your professional network who has first-hand experience of going through a claims process for their commercial insurance, this is a great way to find a suitable insurer to work with.

#4 Do your Research

If you are comparing quotes across a number of business general liability providers, and you have no first-hand experience of dealing with any of these companies in the past; then you need to make sure you check their online reputation before you buy a CGL policy.

Looking at their online reviews, their financial standings, and the number of years they have been business can help you decide whether or not they are a verifiable insurer. It might also help you see, at a glance, what their customers have said about their business, their claims, process, and their customer support. Your local Department of Insurance can also confirm that they are licensed to sell insurance as well. If you are comparing insurance policies side-by-side, this can help you rule certain insurers in or out of the process.

How to save money when you buy general liability coverage for your business?

One of the quickest and easiest ways to save money buying commercial general liability insurance for your business is by purchasing a business owners policy. This will combine the coverage you get from a CGL policy with commercial property insurance, and in some cases, you will also get business interruption coverage included as well. When you buy a BOP, you will typically notice a much lower price compared to buying each policy in isolation of one another.

Aside from this, you can set a higher deductible, and this may reduce the cost of buying general liability insurance for your business.

In any instance, it’s a good idea to speak with a local commercial insurance agent first. They can talk you through the different coverage options and answer any specific questions you might have about the terms of insurance, and more.


In Summary

Buying commercial general liability coverage online should never be rushed, nor should you buy a policy without first checking the terms, limitations, and exclusions in detail. Regardless of whether you need a CGL policy for a new or established business, you can always save money on insurance by bundling policies together. If you rent or own a property for your business, it makes sense to purchase a BOP, which will combine general liability, commercial property coverage, and in most cases, business interruption coverage into a single package.

A local commercial insurance agent can also be a great help. Their knowledge of the insurance market combined with the fact that they will be able to save you both time and hassle are each compelling reasons to give them a call, and ask them to find your business the best general liability coverage for your individual insurance exposures.


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