Business Insurance Terms

General Liability Insurance (CGL)

General Liability Insurance — often called Commercial General Liability or CGL — is the foundational coverage every business needs before signing its first client lease, contract, or hiring its first employee. It protects your company from third-party lawsuits alleging that your operations, physical premises, products, or advertising caused someone bodily injury, property damage, personal injury (reputation harm), or advertising injury (copyright/IP issues). Critically, CGL also pays for your legal defense costs, settlements, and court-ordered judgments — even if the claim against you turns out to be completely groundless.

Definition maintained by the InsurTool Editorial Team. Last reviewed .

What is General Liability Insurance?

In plain English: Think of CGL as your business’s “slip-and-fall + bad-advice-about-your-product” umbrella. A customer trips on your rug → CGL pays. A product you sold burns down a warehouse → CGL pays. You accidentally post someone’s photo without permission → CGL pays. Legal fees alone can sink a small business before a case even goes to trial; CGL covers those defense costs in addition to your policy limits.

Key Takeaways

  • Industry-standard coverage: $1,000,000 per occurrence / $2,000,000 aggregate (written as $1M/$2M)
  • Covers four categories: Bodily Injury, Property Damage, Personal Injury, Advertising Injury
  • Legal defense costs paid OUTSIDE policy limits on most standard ISO CGL forms
  • Required by almost every commercial lease, client MSA, and subcontractor agreement
  • Does NOT cover professional malpractice, workers comp on employees, auto liability, or intentional acts

What Is Included in General Liability Coverage?

A standard ISO CGL policy (the industry template used by 90%+ of US carriers) divides coverage into four mutually-reinforcing buckets:

Coverage Type What It Covers Real-World Claim Example
Bodily Injury (BI) Medical expenses, lost income, pain & suffering, funeral costs for third parties physically injured on your premises, by your operations, or by products you manufactured/sold Customer slips on a recently mopped floor at your café and breaks their hip. They sue for $220,000 in medical bills + lost wages + pain & suffering.
Property Damage (PD) Repair or replacement of someone else’s property that was damaged or destroyed by your business operations, employees, or products Your electrician’s employee drills through a water pipe at a client site, flooding a $20,000 hardwood floor and ruining $12,000 worth of custom furniture.
Personal Injury Non-physical “dignitary” torts: libel, slander, defamation, false arrest, malicious prosecution, wrongful eviction, invasion of privacy, copyright infringement You post a negative Yelp rant about a former vendor claiming they’re a thief; it costs them a $100K contract and they sue you for business defamation.
Advertising Injury Harm caused by your company’s advertising, marketing, or promotional activities — typically misappropriation of ideas, copyright/trademark infringement, or use of another’s slogan/likeness Your social media intern uses a stock photo without a license on an Instagram ad. The photographer sues for $45,000 plus disgorgement of profits.

How General Liability Insurance Works: $1M Each Occurrence / $2M Aggregate

Almost every CGL quote you receive will quote the standard split: $1,000,000 each occurrence / $2,000,000 general aggregate. Here is exactly what those two numbers mean and how they interact over a 12-month policy:

$1,000,000 “Each Occurrence” Limit (Per-Incident Cap)

The per-occurrence limit is the absolute maximum the insurer will pay for any single incident, including all BI, PD, legal defense, and settlements arising out of that one event. If a single event causes $1.8M in damages, your carrier pays $1M and your business is responsible for the remaining $800,000 — unless you have an umbrella policy stacking on top.

$2,000,000 “General Aggregate” Limit (Annual Cap)

The aggregate limit is the grand total the insurer will pay across ALL claims filed during your policy period (usually 12 months). Once this bucket is exhausted, your CGL is effectively gone for the rest of the year and you are self-insuring every additional claim. Aggregate is typically 2× per-occurrence on standard CGL, but $2M/$5M and $5M/$10M packages are common for larger firms.

Case Example — 3 Claims in One Year: A landscaper has a $1M/$2M CGL policy. Claim #1 (client’s fence mowed down): $250K paid. Claim #2 (customer trips over equipment): $900K paid (hits per-occurrence cap on a $1.1M event). Total paid so far: $1.15M. Remaining aggregate: $850K. Claim #3 (herbicide drift damages neighbor’s organic crop): filed at $1.5M. Only $850K remains in aggregate. Landscaper owes the other $650K out of pocket unless a commercial umbrella kicks in.

General Liability Cost & Pricing Table 2026

Pricing is driven primarily by your NAICS/SIC industry code, annual gross revenue, number of employees, state/location, and prior claims history. I used the InsurTool Business Insurance Calculator to run sample quotes — the $1M/$2M CGL tier indeed follows the pattern below, and pairing it with a $1M umbrella only adds $350–$600/year for a much larger safety net.

Industry / Business Type $1M/$2M CGL — Annual Premium Monthly Equivalent Key Rating Drivers
Marketing / Consulting / Admin Office $360 – $620 $30 – $52 Revenue under $2M, office-only exposure
Online Retail / E-commerce (no physical store) $420 – $820 $35 – $68 Product liability risk; annual sales volume
Small Café / Bakery / Retail Store ≤ 1,500 sq ft $650 – $1,350 $54 – $113 Premises foot traffic; food-service liability
IT Services / Web Development / SaaS $750 – $1,650 $63 – $138 Advertising injury; data/cyber exclusions apply
General Contractor / Home Builder ≤ $3M revenue $2,400 – $6,800 $200 – $567 Operations liability; subcontractor vetting required
Commercial Cleaning / Janitorial (10+ staff) $1,800 – $4,200 $150 – $350 Property damage exposure; work-in-process
Restaurant / Full-Service Dining (100+ seats) $3,200 – $9,000 $267 – $750 Alcohol service + slip-and-fall + foodborne illness

CGL vs BOP vs Professional Liability — 3-Way Comparison

Coverage Feature Standalone General Liability (CGL) Business Owners Policy (BOP) Professional Liability (E&O)
Bodily Injury to third parties ✅ ✅ ❌
Property Damage to others’ property ✅ ✅ ❌
Personal / Advertising injury ✅ ✅ Partial (if tied to professional services)
Damage to YOUR building / property ❌ ✅ ❌
Business Interruption / Lost income ❌ ✅ ❌
Professional negligence / Errors in services ❌ ❌ ✅
Malpractice / financial harm from advice ❌ ❌ ✅
Avg $1M limit annual cost $400 – $800 $700 – $1,500 $800 – $3,500
Best fit Businesses that only need third-party liability and/or wrap-up coverage for contracts Small-to-mid businesses under $10M rev that want GL + Property + BI bundled at a discount Anyone providing professional services, advice, designs, or delivering work product where a mistake = client financial loss

Frequently Asked Questions (FAQ)

Does General Liability cover my own employees’ injuries at work?

NO — that is the exclusive purpose of Workers’ Compensation Insurance. In fact, the standard ISO CGL form explicitly excludes employee bodily injury on the job. If an employee is hurt installing a client’s kitchen, CGL will not cover it; only your work comp policy will. Operating without work comp (where mandatory) also voids most CGL exclusions and exposes your business to stop-work orders and 5–20× statutory penalties.

Does CGL cover damage to work that I or my subcontractors performed?

Typically no — standard CGL includes the “Your Work” exclusion for property damage to your finished work after the project is complete. (This is why general contractors carry both CGL and Contractor’s Professional / Builders Risk.) The ISO exclusion does carve back in one important exception: damage to your work performed by a subcontractor on your behalf IS covered, as long as you did not perform the defective work yourself.

Does General Liability automatically follow my products?

Yes — standard CGL includes Products-Completed Operations coverage as part of the aggregate. If you sell a product that injures someone or damages property 6 months after sale, it is still covered by the policy that was active when the product was sold/manufactured. This is one of the main reasons business owners should maintain continuous CGL coverage even if revenue dips — gaps in coverage can create permanent losses for product sales made during the gap.

Can I add Additional Insureds to my CGL policy?

Absolutely, and most clients and general contractors will require it. AI endorsements (blanket or scheduled) extend your CGL defense and indemnity to the named additional insured for claims arising out of YOUR work. A Blanket Additional Insured endorsement (ISO 20 01) automatically grants AI status to any party that your written contract requires you to name — by far the most common and cost-efficient setup in 2026. See our COI guide for AI vs. Certificate Holder nuances.

What’s the #1 mistake business owners make with CGL?

Buying only the minimum $1M/$2M because “that’s what the contract says” without calculating their actual balance-sheet exposure. If your business owns real estate, has $2M+ in annual revenue, or manages customer trust funds, $2M aggregate is almost certainly too low. A single construction-defect class action or restaurant food-poisoning outbreak can blow through $2M in defense fees alone — before any settlement is paid. Stacking a $5M Commercial Umbrella on top of CGL costs roughly $800–$2,000/year and is the single most cost-effective risk transfer most SMBs never buy.

Sources & References

Business Owners Policy (BOP) Professional Liability / E&O Commercial Umbrella Liability Certificate of Insurance (COI) Commercial Property Insurance Workers’ Compensation Insurance

About this definition

Written and checked against the primary sources linked on this page by the InsurTool Editorial Team. Definitions describe how these terms are used in the United States; policy wording differs between insurers, and state law changes the meaning of some terms. Your own policy document is the authority for your coverage.

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InsurTool·Reviewed by Alice Zhang

Figures on this page are compiled by the InsurTool editorial team from NAIC and state Department of Insurance publications, the Insurance Information Institute, and carrier methodology disclosures. Every figure is checked against its cited source before publication; anything unverified is labelled as an estimate or left out. InsurTool is an educational resource — not insurance, brokerage, or financial advice.