General liability insurance is one of the first policies a business owner buys — and often the least understood. It covers third-party bodily injury, property damage, and advertising injury. What it does not cover is just as important to know.
What general liability actually covers
A standard GL policy responds when someone outside your business (a customer, vendor, or passerby) is injured on your premises or by your operations, or when your advertising causes harm — libel, copyright infringement, false advertising claims.
- Bodily injury to a third party (slip-and-fall on business premises)
- Property damage you cause to someone else's property
- Personal and advertising injury (defamation, copyright infringement)
- Medical payments to injured parties regardless of fault
The gaps that surprise business owners
Professional errors
If your advice, design, or service causes a client a financial loss, GL won't cover it. That's what Errors & Omissions (E&O) or Professional Liability insurance is for. Consultants, designers, accountants, and anyone who provides a service for a fee should carry both.
Employee injuries
Workers' compensation is a separate policy. GL explicitly excludes employee claims. In most states, carrying workers' comp is legally required the moment you hire your first employee.
Your own property
GL covers damage you cause to others. If your office floods and destroys your equipment, you need commercial property coverage. These are separate policies that are often bundled into a Business Owner's Policy (BOP).
A single liability claim that exceeds your policy limits can reach the owner's personal assets in many business structures. An umbrella policy — typically $1M–$5M in coverage — is inexpensive relative to the protection it provides.
How to know if your limits are adequate
Standard GL policies are often written at $1M per occurrence / $2M aggregate. For many small businesses this is sufficient. But if you work with large clients, operate in high-foot-traffic spaces, or handle valuable third-party property, those limits can be exhausted by a single incident.
An annual coverage review — comparing your policy limits against your contract requirements, revenue growth, and the size of a realistic worst-case claim — takes less than an hour and can save a business.