What Does General Liability Insurance Cover?

You’re one accident away from a lawsuit that could destroy everything you’ve built.

43% of small business owners report being threatened with or involved in civil litigation. Most weren’t negligent. Most never saw it coming. And many weren’t adequately insured.

What does general liability insurance cover? It covers the most common threats to your business’s survival: customer injuries, property damage, product problems, and reputation attacks. Without it, you pay for everything—legal defense, medical bills, settlements—out of your own pocket.

Five Ways General Liability Insurance Protects Your Business

Understanding exactly what does general liability insurance cover helps you see how it protects your business in these critical situations:

It Pays When People Get Hurt

When the inevitable happens—a customer slips on your wet floor, a client trips over equipment at your office, or a delivery person falls on your icy walkway—general liability responds.

A Sacramento hardware store owner thought his floors were safe until a customer fractured a hip and filed a $42,000 claim. General liability covered it all: the ambulance, the hospital bills, the legal defense, and the settlement.

The policy pays for medical expenses, pain and suffering, lost wages, and legal defense. Without it, these costs come directly from your business assets or personal savings.

It Covers Damage to Other People’s Property

Your operations damage others’ property more easily than you think. A landscaper’s mower flings a rock through a window. A plumber’s torch scorches expensive cabinetry. A caterer spills red wine on a venue’s white carpet.

When a Denver painting company accidentally splattered paint on a homeowner’s antique furniture, the $15,300 restoration bill would have bankrupted them without general liability insurance.

Remember: your tools, your employees, your operations—all carry risk. General liability handles the financial consequences when things go wrong.

It Protects You After the Job Is Done

The real risk often emerges after you’ve completed the work or sold the product.

A furniture maker in Portland faced ruin when a chair they built collapsed under a customer, causing back injuries. The $78,000 claim came months after the sale. Their general liability insurance saved the business.

For contractors, problems often surface weeks or months after completion. A Texas plumber installed a water heater perfectly—or so he thought. Three weeks later, a leak caused $26,500 in water damage. Again, general liability made the difference between staying in business and closing shop.

It Defends Your Reputation and Creative Work

Some of the most expensive claims involve no physical injury at all. When a Florida retailer’s marketing campaign inadvertently used phrases similar to a competitor’s trademarked slogan, they faced a $125,000 lawsuit for copyright infringement.

General liability defends against claims of libel, slander, copyright infringement, and false advertising. These “paper” claims often cost more than physical injuries, with legal fees that can drain your reserves even if you ultimately win the case.

It Provides Immediate Help for Minor Problems

Smart business owners know that small injuries can become big lawsuits. When a customer tripped at a Chicago bookstore and needed stitches, the owner’s general liability insurance immediately paid the $2,800 medical bill—no questions asked, no determination of fault. That quick response prevented a potential lawsuit.

Similarly, when a Nashville restaurant’s kitchen fire damaged their leased building, their general liability covered the $175,000 in damages because they were legally responsible. Without this coverage, the landlord’s insurance would have paid—then sued the restaurant owner for reimbursement.

What General Liability Won’t Cover: Important Exclusions

When asking what does general liability insurance cover, it’s equally important to understand what it doesn’t cover. No insurance covers everything. General liability specifically excludes:

• Employee injuries require workers’ compensation insurance, which is mandatory in most states. One worker’s back injury can easily cost $50,000 in medical bills and lost wages.
• Professional errors in advice or services aren’t covered. Accountants, consultants, and other professionals need separate E&O insurance for protection against claims of negligent work.
• Business vehicles need commercial auto insurance. Your personal auto policy won’t help when your delivery driver hits someone.
• Your own property isn’t protected. You need commercial property insurance to cover your building, equipment, and inventory against theft, fire, and other disasters.

The most expensive gap? Data breaches. The average cyber attack costs small businesses over $200,000—enough to force many into closure. Cyber liability insurance fills this critical gap.

How Much Coverage Do Real Businesses Need?

Beyond understanding what does general liability insurance cover, you need to know how much coverage is enough. The amount your business needs depends on four factors:

• Your industry’s risk level. High-risk businesses like construction, restaurants, and retail stores need more coverage because they face more frequent claims. The average slip-and-fall claim is $20,000, but food poisoning claims average $75,000, and construction injuries can reach six figures.
• Your business size. More revenue, more locations, more employees—all mean more exposure. A business with $5 million in annual revenue typically needs more protection than one making $500,000.
• Your contractual obligations. Most commercial leases require at least $1 million in liability coverage. Client contracts often specify minimum coverage amounts. Government contracts may require $2 million or more.
• Your assets at risk. Consider what you could lose: business equipment, inventory, savings, even personal assets in some business structures.

Most small businesses start with a “$1M/$2M” policy—$1 million per occurrence, $2 million aggregate annual limit. But standard amounts aren’t right for every business.

When Standard General Liability Coverage Isn’t Enough

After understanding what does general liability insurance cover, some businesses discover they need additional protection. For businesses facing larger risks, these three enhancements provide critical extra protection:

1. Umbrella Coverage: Your Safety Net for Large Claims

Umbrella coverage adds an additional layer that kicks in when your primary policy reaches its limit. It’s surprisingly affordable—often just 25-40% of your primary premium for an extra $1 million in protection.

When a Southern California landscaping company’s equipment started a fire that spread to multiple properties, the $1.5 million claim exceeded their $1 million general liability limit. Their umbrella policy covered the remaining $500,000, preventing bankruptcy.

2. Bundled Policies: Broader Protection, Lower Cost

A Business Owner’s Policy (BOP) combines general liability with property insurance, typically saving 10-15% compared to separate policies. For larger businesses, a Commercial Package Policy offers more customization options.

3. Industry-Specific Endorsements: Filling the Gaps

The right endorsements transform standard coverage into tailored protection for your industry’s unique risks:

• Contractors need additional insured coverage and completed operations extensions
• Restaurants and bars need liquor liability protection
• Manufacturers should consider product recall expense coverage
• Auto Repair Shops need garage keepers liability and hired and non-owned auto coverage

The Real Value Beyond Claims

What makes general liability insurance worth every penny? More than just protection against lawsuits:

• Financial survival. With customer injury claims averaging $30,000, property damage claims at $17,000, and the cost to defend even a frivolous lawsuit at $25,000, insurance often makes the difference between continuing business and closing your doors.
• Business opportunities. Without proof of liability insurance, you can’t lease commercial space, secure government contracts, work as a subcontractor, or partner with larger businesses. It’s the price of admission to serious business opportunities.
• Peace of mind. Successful business owners make decisions based on strategy, not fear. With proper coverage, you can focus on growth rather than worrying about what might go wrong.
• Professional legal defense. When you’re sued, your insurance company appoints experienced attorneys who specialize in your type of case. These legal services alone can easily cost $20,000 for even simple cases—costs covered by your policy whether the claim is valid or not.

Finding the Right General Liability Coverage: Next Steps

Now that you understand what does general liability insurance cover, how do you select the right policy? After 15 years helping businesses find the right insurance protection, we’ve learned that general liability insurance is too important to leave to chance. At IronPoint Insurance Services, we take a different approach:

1. We assess your specific risks based on your industry, operations, and size
2. We match coverage to your unique needs, not generic packages
3. We find competitive rates by comparing options from multiple top carriers
4. We explain everything in plain English—no insurance jargon
5. We provide ongoing support as your business evolves

Don’t wait for a claim to discover what your general liability insurance actually covers—or worse, what it doesn’t.