8 Common Questions about Commercial General Liability Insurance, Answered

General Liability insurance: you know you need it. But just what *is* it? From the risks it covers to what this coverage will cost you, we’re here to answer all your vital questions so you can make the most informed decision about protecting your business.

1. First up: what is Commercial General Liability insurance, anyway?

General Liability insurance, sometimes referred to as Commercial General Liability insurance (CGL) or business liability insurance, is a type of coverage that protects businesses large and small against the risk of unintentional accidents that happen on the job. These accidents fall into two main categories: bodily injury and property damage to a third party. Bodily injury refers to physical bodily harm, while property damage encompasses any harm to and/or loss of use of tangible property.

For more on the specifics of General Liability insurance along with a variety of examples of how this coverage might come into play, whether you’re a housekeeper or an event planner, check out this deep dive on the subject.

2. Does my small business really need insurance?

If you’ve reviewed the examples of risks associated with your work and think, “that type of event seems unlikely—I’ll just go without coverage,” consider this: if you work with clients face-to-face at your place of work, their place of work, or a third-party location, it is nearly inevitable that some kind of adverse incident will eventually occur.

This may be something minor that you could easily pay for out of pocket, or a major expense that would sink a small business. You have zero control over what types of incidents occur—but you do have the ability to purchase an insurance policy that protects you from the full range of potential risks.

Just as you can’t foresee an accident, you also can’t predict how a client or third party will react. Unfortunately, lawsuits have become an all-too-common means of extracting payment in these types of scenarios. General Liability insurance protects you from third parties who are quick to sue, and the cost of insurance pales in comparison to the cost of defending yourself in court.

Last but not least: even if you don’t find any of the above reasons compelling, you may be required to purchase coverage to comply with state or local regulations, and many clients or business partners may refuse to do business with you if you are not properly insured. Make sure you are familiar with the regulations where you work and your clients’ requirements before deciding to forego General Liability insurance.

3. What kind of small business insurance do I need?

If you’re shopping for business insurance, General Liability insurance should be at the top of your list. For all the reasons listed above, this type of coverage is an essential safeguard against a variety of accidents that could constitute a major expense for your business.

Depending on your industry and the specific type of work you do, you may want to consider taking out additional coverage for your business. For example, Professional Liability insurance can serve as a complement to your General Liability policy.

Professional Liability protects the insured against errors and omissions claims—i.e., if someone alleges that you’ve performed your job improperly or inadequately. Most Professional Liability policies cover economic or financial losses suffered by third parties, but not bodily injury or property damage (which are covered by Commercial General Liability insurance).

4. Is doing business without General Liability insurance illegal?

The answer to this question depends on where your business is located. While there are no federal laws requiring small businesses and independent contractors to obtain insurance coverage, your city or state may have specific laws in place that require it.

While this is most common for Worker’s Compensation, some states do require businesses to have General Liability coverage in place as well. Make sure to look into the laws in your particular city, state, or municipality to ensure that your business operations are in compliance with local regulations.

5. What does General Liability insurance not cover?

Let’s first outline what your General Liability policy will cover. Coverage falls into three main categories: bodily injury and property damage (as outlined above), personal and advertising injury, and medical payments.

Personal injury is a category of insurable offenses that produce harm (including bodily injury) resulting from false arrest, detention, or imprisonment. Advertising injury includes offenses in connection with the insured’s advertising of its goods or services, such as libel, slander, invasion of privacy, and copyright infringement.

Meanwhile, the medical payments coverage included in your insurance policy covers immediate medical expenses for bodily injury to a third party. These expenses could include first aid administered at the time of the accident; necessary medical, surgical, x-ray, and dental services; and necessary ambulance, hospital, or professional nursing services.

Liability for these types of incidents is covered by most standard General Liability policies. However, there are certain conditions under which your coverage would not apply: if the incident arises from activities that are excluded under your policy, the incident arises from work that took place outside of the policy period, or the incident involved expected or intentional acts on the part of the insured, these are all reasons that a claim might be denied.

For the specifics of what activities are included and what exclusions apply to your coverage, please refer to your policy documents or obtain a sample policy.

6. How much insurance should a small business carry?

It is generally recommended that businesses take out anywhere from $1 million to $2 million in General Liability coverage. Depending on the risks facing your business you may opt higher or lower: for example, a contractor working on active construction sites may need more protection than a consultant who primarily meets with clients in an office setting.

You should also consider the requirements set by your clients or investors, and check to see if your state requires businesses to carry a minimum amount of General Liability insurance.

7. How much should small business insurance cost?

This is an easy one—it should cost as little as possible while still affording you the full protection of a standard General Liability policy! As alluded to in the last section, the actual cost of your coverage will vary depending on a variety of factors: the liability limit you select, how high- or low-risk your work is considered by insurers, and the duration of your policy among them.

8. What liability insurance is available for a startup?

If you’re worried about how your small business will cover the upfront costs of an expensive annual General Liability insurance policy, you have another option: the policies arranged by Thimble are designed for sole proprietors, independent workers, and freelancers who want on-demand General Liability coverage just for the work that they’re doing.

Our policies start at $5/hour, and can be selected by the hour, day, month, or all the way up to a year, depending on your business needs. The low price point means that insurance doesn’t have to be a barrier to your success: you can get covered within 30 seconds for any job that comes your way.