General liability insurance is not usually required by law, but business owners should be aware of situations when a licensing body, a client, or a lessor might require this common type of coverage.
Is general liability insurance required by law?
No, not usually. However some states include general liability insurance in their licensing criteria for construction contractors or developers. In California, for example, it's required for all contractors except handymen. To find out if your state requires coverage, see its licensing criteria.
States usually require other types of commercial insurance for a wider range of professions. For example, most states require that businesses with employees carry workers’ compensation insurance. State laws also mandate how much commercial auto insurance coverage a business must purchase.
When do small businesses need general liability insurance?
Most small business owners purchase general liability insurance shortly after they start a business. Situations that drive business owners to get this policy include:
Applying for a professional license. Real estate agents, dentists, and accountants need a license to practice in the United States. The requirements for a license could include general liability insurance.
General liability insurance shows clients they can rely on your company
Clients and companies often require this insurance because it offers them reassurance about your business. Because general liability insurance covers many common lawsuits, clients know that your business's finances are relatively secure. Clients want to know that you'll be able to deliver the work you're contracted for and that a lawsuit or other covered event won't prevent you from finishing the job.
General liability insurance also reassures your clients that you'll be able to compensate them if you damage their property or injure someone with your work.
To learn more about how general liability insurance protects businesses, read our article that provides general liability insurance examples.
How much general liability insurance coverage do I need?
General liability insurance is not a one-size-fits-all policy. A business can choose policy limits that match the appropriate level of risk. Plus, you can customize your general liability policy with endorsements that cover specific risks.
Which policy limits should I choose?
Most small business owners that purchase general liability through Insureon choose a $1 million / $2 million policy. This includes:
$1 million occurrence limit. While the policy is active, the insurer will pay up to $1 million to cover any single claim.
$2 million aggregate limit. During the lifetime of a policy (usually one year), the insurer will pay up to $2 million to cover claims.
Find more information about general liability insurance costs.
What endorsements might I need?
General liability insurance is a versatile policy. You can modify it by adding endorsements for specific risks. Endorsements include:
Product liability insurance. This policy covers legal costs when a customer is injured by a product that your company manufactured or sold.
Hired and non-owned auto insurance. This policy pays for damages caused by vehicles that your company uses but does not own.
Liquor liability insurance. This policy protects businesses that sell or serve alcohol against damages caused by inebriated patrons.
Contact one of Insureon's agents today to find out about other endorsements that could benefit your business.
What's required of small businesses applying for general liability insurance?
When applying for general liability insurance, your business will need to provide your revenue, number of employees, and your claims history, along with other information. Your company’s level of risk and whether or not it’s filed a claim in the past influence how easy it is to get a quote and the amount you’ll pay for a premium. Insureon can likely help your company find insurance, even if you have a history of filing claims or operate in a high-risk industry.
Save money by comparing quotes with Insureon
To receive free quotes for general liability insurance, fill out our easy online application. Once you find the right policy for your business, you can begin coverage in less than 24 hours.