What Is Commercial General Liability Insurance?
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Commercial General Liability Insurance is an insurance coverage that protects small businesses from having to pay for certain types of lawsuits.

We know insurance can get complicated, so let's go over the basics. Here's how General Liability Insurance works for a small business:

  • An insurance company agrees to cover your business.
  • Your business pays an annual fee (called a "premium") to the company.
  • In exchange for the premium, the insurance company agrees to pay for certain types of lawsuits. What is and is not covered by your insurance is written up in an "insurance policy."
  • If you're sued and the lawsuit is one of the ones covered by your policy (see below), the insurance company covers your legal expenses up to your "policy limit," the maximum amount of money the insurance provider can pay toward a claim.
  • In order to receive these financial benefits from the insurer, you pay a small "deductible," the amount of money you must put toward a claim.

What Does General Liability Insurance Cover?

There are many different types of insurance for small businesses, and each one covers different risks your business is exposed to. Commercial General Liability Insurance covers lawsuits that are filed against a small business by non-employees. It generally covers lawsuits over…

  • Property damage (e.g., a contractor is sued when he damages the wiring in a client's house while installing new insulation).
  • Physical injury (e.g., a deliveryman sues a small business when he trips over the uneven cement of its walkway).
  • Copyright infringement (e.g., a small business is sued when it uses a copyrighted song without permission in its advertisement).
  • Reputational injuries (e.g., a vendor sues a small business for warning other businesses against using his service).

As you can see, Commercial General Liability Insurance covers a wide range of lawsuits. If vendors, subcontractors, customers, or other non-employees sue you for any of the reasons listed above, the insurance company can cover the cost of the lawsuit, paying for…

  • Legal teams to represent your small business.
  • Witness fees.
  • Evidence costs.
  • The judgment or settlement (the final amount of damages you owe the other side).

Is General Liability Insurance Required by Law?

No, General Liability Insurance isn't required by law. But almost every business carries it because contracts often require it. In other words, no state or federal law mandates it, but your landlord, business partners, or other parties might require you to have General Liability Insurance in order to sign a contract with them.

In the business world, Commercial General Liability Insurance is standard operating procedure for any business that interacts with customers, clients, and other outside parties.

Coverage note: some state laws will require CGL Insurance if you are applying for a professional license, like a plumber's or electrician's license.

How Can I Save Money on Commercial General Liability Insurance?

One simple way to save money is to buy a Business Owner's Policy, which packages General Liability Insurance and Property Insurance together. When you buy two policies together, the insurance company offers your small business a discount on its insurance coverage.

Most small businesses qualify for a BOP package, but some in riskier industries can't get this discount. But don't worry – you can talk with one of our agents, and we'll see if you qualify for this or other discounts.

Where Do Small Businesses Get General Liability Insurance?

Insureon is the nation's leader for online small business insurance. Whether you run a home remodeling business or pet grooming salon, we've got insurance agents that specialize in your field. Call us today (or submit an online insurance form) for a free quote on small business insurance.

General Liability Insurance: Further Reading

General Liability Insurance in the Insureon Blog