What Is Commercial General Liability?
Commercial General Liability (CGL) is a core insurance product that protects businesses from third‑party claims for bodily injury, property damage, personal injury, and advertising injury. It covers legal defense costs and settlements up to the policy limits.
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Typical Claims Covered by CGL
Common scenarios include:
- Injury on business premises
- Product damage caused by a company's goods
- Wrongful advertising statements
- Defamation or privacy violations
When Does a CGL Policy Activate?
A claim triggers coverage when a third party files a lawsuit or seeks a monetary remedy for damages that the insured business is found legally responsible for. The policy does not cover intentional acts, employee injuries, or damages arising from the business's own negligence in certain contexts, unless specifically added.
Contract Liability and CGL
Many contracts require a contractor or vendor to carry CGL as a condition of doing business. The policy limits the contractor's liability exposure and protects the client from lawsuits that could arise from the contractor's operations. When a contract includes a liability clause, the insured must demonstrate that a valid CGL policy is in force and that the limits meet the contractual requirement.
Choosing the Right Policy Limits
Small businesses often face a trade‑off between premium cost and coverage amount. Typical limits range from $1 million to $2 million per occurrence, with additional limits for aggregate coverage over the policy period. A table below compares common limit structures:
| Limit Type | Typical Coverage | Common Use |
|---|---|---|
| Per Incident | $1 million | General operations |
| Aggregate | $2 million | All claims in a year |
| Product Liability | Variable | Manufacturing or retail |
Additional Coverages to Consider
While CGL is essential, businesses may augment coverage with:
- Professional Liability (Errors & Omissions)
- Cyber Liability
- Employment Practices Liability
- Product Recall Insurance
Key Takeaways for Small Business Owners
• CGL protects against third‑party lawsuits and defense costs. • It activates when a claim is filed, not just when an incident occurs. • Contractual agreements often mandate CGL; verify limits match contract terms. • Evaluate additional coverages based on industry risks. • Regularly review policy limits and endorsements to stay compliant with changing business needs.