General liability insurance limits

Most small business owners choose general liability coverage limits of $1 million per occurrence and $2 million aggregate for each policy period. Both limits can impact your business operations.

Your per-occurrence coverage limit is how much your insurance company will provide on a single incident. For example, if you had an insurance claim of $1.5 million on a single incident and a $1 million per-occurrence limit, the insurance company would pay $1 million on that claim and your business would be responsible for the remaining $500,000 (plus your deductible).

The aggregate limit is the total dollar amount of coverage that your general liability policy provides during the policy period, which is usually one year. If your business had a $2 million aggregate limit, your insurance company would stop paying on general liability claims if they exceed a combined $2 million during a policy year.

There are many types of claims and lawsuits covered by general liability insurance. With a per-occurrence limit of $1 million and an aggregate limit of $2 million, this is how your general liability insurance provider would cover claims:

A customer has a slip-and-fall accident with a bodily injury at your retail store, leaving them in pain and unable to work. They sue your business for $1 million in medical payments, lost income, and pain and suffering.

Your insurance company would cover these medical bills, plus any related court costs and legal settlements. The coverage for this incident would be capped at $1 million because this is your per-occurrence limit.

Your construction business accidentally damages a customer’s property while working on a job, resulting in a lawsuit for $200,000 in damages. Your insurance company would cover this claim, since it’s less than your $1 million per-occurrence limit.

A customer has an allergic reaction to a hair or skin care product they purchased from your personal care business and they sue you for $100,000. Your general liability insurance policy would cover this claim and lawsuit, because general liability typically includes product liability coverage.

If one of your competitors took issue with something you said about them on your website, on social media, or in an advertisement, they might sue you on a defamation claim. As long as your court costs, legal verdicts, or settlements add up to less than $1 million, this claim would be covered under your per-occurrence limit.

If the claims from a single incident exceed the per-occurrence limit of $1 million, your business will have to pay for any amount over the limit. Your insurance company will only cover claims from an incident up to the per-occurrence limit.

With a $2 million aggregate limit, if your general liability claims add up to more than this in a coverage year, your insurance company would cover up to $2 million in claims. Your business would cover anything that exceeds this amount.

Coverage limits have a direct impact on the cost of general liability insurance, along with other factors such as your type of business, the size of your business, and your location.

A majority (91%) of Insureon customers choose a general liability policy with a $1 million per-occurrence limit and a $2 million aggregate limit. Our customers pay an average of $42 per month, or about $500 per year.

Customers who need higher limits can expect to pay a higher premium. While it might be tempting to reduce your coverage limits to save money on the premium, you need to make sure your business will be able to financially survive an expensive claim or lawsuit.

Another thing to consider is the size of your deductible. The average general liability deductible among Insureon customers is $500. With this amount as your deductible, your business would cover the first $500 on a claim, before your insurance coverage kicks in to cover the rest—up to your policy limits.

A higher deductible could reduce your insurance premiums, though it will increase your out-of-pocket costs on a claim. You’ll want to make sure you choose a deductible that keeps your insurance affordable, yet also provides your business with enough financial security in case of a claim.

One way to reduce your premium on this type of coverage is to combine your general liability and commercial property insurance into one policy known as a business owner’s policy (BOP). This type of policy is usually less expensive than buying the coverages separately.

The type of industry you’re in, the size of your business, your location, and your business relationships are all things to consider when choosing your coverage limits for general liability insurance.

Any business that’s open to the public, such as retailers and those in food and beverages, will likely need more general liability coverage than a one or two-person home business, such as a small consulting firm.

A business that involves visiting other people’s homes and businesses, such as installation contractors or landscapers, would need sufficient liability coverage in case their business is accused of causing property damage or physical harm.

Your customers may require you to have a certain amount of general liability coverage to sign a contract. Landlords often require this coverage for their business tenants, along with commercial property insurance.

State governments typically don’t require general liability insurance for businesses, although you may need certain amounts of general liability coverage for a professional license. General liability is sometimes required for real estate agents, dentists, accountants, and construction contractors.

If you need any help choosing your coverage limits for general liability or any other types of business insurance, you can consult with an insurance agent about all your business insurance needs. We can help you find the right general liability coverage at the best price.

If you’re not sure about what kind of coverage you already have, you can check the declarations page of your policy. It spells out your coverage limits and any exclusions a policy may have.

You could also fill out Insureon’s easy online application to compare insurance quotes from top-rated U.S. carriers. Once you find the right coverage for your small business, you can begin coverage and get your certificate of insurance (COI) in less than 24 hours.