Most small businesses grab $1 million per occurrence and $2 million aggregate in general liability coverage—it’s the standard starting point. But here’s the catch: a consulting firm doesn’t face the same risks as a construction company. Government contracts might demand specific minimums, landlords often require proof of coverage, and state licensing boards have their own rules. Industry type, location, claims history, and revenue all push premiums up or down. The real answer depends on what could actually go wrong in a specific business, and there’s more to evaluate.
Design Highlights
- Most small businesses choose $1 million per occurrence and $2 million aggregate as standard general liability coverage.
- Your industry risk level significantly affects coverage needs; construction companies require more than consulting firms.
- Government contracts and commercial leases often mandate minimum coverage of $1 million per occurrence and $2 million aggregate.
- Higher-risk operations may need umbrella policies ranging from $2 million to $20 million for catastrophic scenarios.
- Average small business coverage costs approximately $42 monthly, with premiums varying by industry and claims history.
While most business owners would rather think about anything other than insurance, general liability coverage isn’t optional—it’s the financial safety net that keeps a single lawsuit from torching years of hard work.
Most small businesses go with $1 million per occurrence and $2 million aggregate per policy period. That’s industry standard. The per-occurrence limit caps what the insurer pays for any single incident—everything above that comes straight from the business owner’s pocket. The aggregate limit is the total available for all claims during the policy year. Once that’s exhausted, the business is on its own for additional costs.
Standard $1 million per occurrence and $2 million aggregate limits protect businesses until claims exceed those thresholds—then owners pay out of pocket.
Higher limits exist, naturally. Some businesses opt for $2 million per occurrence and $4 million aggregate, often stacking umbrella or excess liability policies on top for catastrophic scenarios.
What determines the right amount? Business type matters most. A consulting firm faces different risks than a construction company. Size plays in too—more employees and higher revenue typically mean greater exposure. Customer base, location, operational complexity, and industry risk all factor into the equation. Businesses that grow or change operations often need to bump up coverage. Public-facing businesses generally require more coverage than home-based firms.
Legal and contractual requirements frequently make the decision for business owners. Government contracts and many client agreements demand minimum limits of $1 million per occurrence and $2 million aggregate. State licensing for certain contractors might require anywhere from $300,000 to $1 million per occurrence. Commercial landlords routinely write the same $1 million/$2 million requirement into lease agreements. Larger projects can require umbrella coverage ranging from $2 million to $20 million. Miss these requirements and the business doesn’t get the contract or lease. Period.
The coverage itself includes bodily injury, property damage, personal injury, and advertising injury claims. Legal fees, court costs, settlements, and expert witness expenses all eat into those limits. Some policies cover medical payments for injuries on business property. Damage to rented premises might need specific endorsements. Professional errors typically aren’t covered—that requires separate professional liability insurance. General liability insurance also protects against legal expenses from customer lawsuits.
Determining appropriate coverage means evaluating the business risk profile, reviewing existing contracts and leases for minimum requirements, examining size and location factors, and looking at potential claim severity based on industry data. Consulting multiple insurance providers helps compare options. A licensed agent can help ensure the insurance selection fits the business without overspending.
The average small business pays around $42 monthly or $500 annually. Premiums vary based on industry risk, location, revenue, employee count, claims history, and years in operation. Higher limits cost more. Shopping around helps control costs without leaving the business exposed.
Frequently Asked Questions
Does General Liability Insurance Cover Employee Injuries at Work?
No, general liability insurance doesn’t cover employee injuries at work.
That’s what workers’ compensation is for. General liability handles third-party claims—customers who slip and fall, visitors who get hurt on your premises, that sort of thing.
Employee injuries? Those fall under workers’ comp, which covers medical bills, lost wages, and disability benefits. It’s a separate policy entirely.
Many business owners get this wrong, thinking general liability covers everyone. It doesn’t. Employees need their own dedicated coverage.
Can I Cancel My General Liability Policy if Business Slows Down?
Yes, a business owner can cancel general liability insurance during a slowdown.
But here’s the catch: most policies won’t allow conditional suspension, so cancellation means buying a whole new policy later.
And good luck getting a full refund—minimum earned premium clauses usually prevent that.
Plus, insurers hate coverage gaps. They’ll likely jack up rates when reinstating coverage because they view the lapse as risky behavior.
Short-term savings, long-term headache.
Are Independent Contractors Required to Have General Liability Insurance?
No federal law requires independent contractors to carry general liability insurance. Period.
But here’s the catch—some states mandate it for specific industries like construction. Electricians, contractors, high-risk jobs? More likely to face these rules. Local ordinances pile on too, depending on the work.
The real kicker? Clients often require proof of coverage before signing contracts. No insurance means no contract.
Industry standards vary wildly, so it’s more about client demands and state regulations than universal requirements.
Does General Liability Insurance Cover Damage to Rented Equipment?
No, general liability insurance doesn’t cover damage to rented equipment.
That’s the rental company’s worst nightmare, which is why they require separate physical damage or property insurance. General liability only covers third-party injuries and property damage—not stuff the business rents or owns.
Without physical damage coverage, the renter pays out of pocket for repairs or replacement. Rental agreements typically demand proof of this insurance before handing over the keys to expensive equipment.
Will My Rates Increase After Filing a General Liability Claim?
Yeah, rates will likely go up after filing a claim.
How much? Depends on the damage.
Small claims might bump premiums 4-10%.
Bigger payouts or lawsuits? Think 25-40% increases.
Insurers hate risk, and a claim screams “liability.”
They’ll also check overall claims history—multiple incidents make things worse.
Industry matters too. High-risk businesses get hit harder.
Market trends don’t help either, with rates already climbing 5-10% annually.
Bottom line: filing a claim usually costs more than just the deductible.
