Overview

Business liability insurance helps address certain claims that a business caused bodily injury, property damage, or personal and advertising injury. It is often discussed as commercial general liability insurance, or CGL. Coverage depends on the policy wording, limits, exclusions, endorsements, and facts of the claim.

Small businesses may encounter liability coverage as a standalone commercial general liability policy or as part of a business owners policy. A business owners policy, often called a BOP, typically packages property, business interruption or business income, and liability coverages for eligible businesses.

General liability

General liability coverage may include premises and operations coverage, which addresses certain bodily injury or property damage claims connected to business premises or business operations. It may also include products and completed operations coverage for certain injury or damage claims arising away from the business premises because of products or completed work.

CGL policies may also address personal and advertising injury, such as certain claims involving libel, slander, or advertising-related injury. Legal defense may be included for covered claims, subject to the policy terms. Defense rules, deductibles, self-insured retentions, and whether defense costs reduce limits can vary.

Business owner policy

A business owners policy can be a package option for some small and midsize businesses with similar risk profiles. It commonly includes property coverage for business buildings or contents, business interruption or business income coverage for certain covered shutdowns, and liability protection for covered injury or damage claims.

A BOP is not available or sufficient for every business. Some businesses need more customized coverage because of their industry, property, services, contracts, vehicles, employees, or professional exposures. Eligibility and coverage features vary by insurer.

What it may not cover

General liability and BOP liability coverage may not cover professional liability, commercial auto, workers compensation, employee injury, health insurance, disability insurance, or employment-related claims unless separate coverage applies. Professional services often require errors and omissions or professional liability coverage. Vehicles used for business may require commercial auto coverage.

CGL policies also contain exclusions. Examples can include damage to the business's own work or product, certain contractual liability, recall costs, workers compensation and employer liability, pollution, and other risks depending on the policy and endorsements. Exclusions should be reviewed closely because coverage names alone do not explain the full contract.

Cost and risk factors

Premiums can reflect the business type, location, revenue, payroll, number of employees, customer traffic, products sold, services performed, prior claims, selected limits, deductibles or retentions, and requested endorsements. Contract requirements from landlords, lenders, vendors, or clients may also influence coverage decisions.

Risk management can affect how a business prepares for claims. Written safety procedures, contract review, recordkeeping, employee training, premises maintenance, and incident documentation may help a business manage exposures, but they do not guarantee coverage or prevent every claim.

Checklist

  • List the business activities, products, services, and locations to be insured.
  • Review contracts and leases for insurance requirements, additional insured requests, waivers, or required limits.
  • Identify any vehicles used for business and whether commercial auto coverage is needed.
  • Confirm employee status and workers compensation obligations under state rules.
  • Identify professional services that may require professional liability or errors and omissions coverage.
  • Read exclusions, endorsements, limits, deductibles, and defense provisions in the policy.
  • Ask how premises, operations, products, completed operations, and personal and advertising injury are handled.

FAQ

Is general liability the same as professional liability?

No. General liability commonly addresses certain bodily injury, property damage, and personal and advertising injury claims. Professional liability generally addresses errors, omissions, or professional service-related claims and is usually separate.

Does a BOP include commercial auto insurance?

Business owners policies typically do not include commercial auto coverage. Business vehicles or employee vehicles used for company business may need separate review.

Does general liability cover employee injuries?

Employee work-related injuries are usually handled through workers compensation or employer liability coverage, not standard general liability coverage.

Can a contract require specific liability insurance?

Yes. Leases, customer contracts, vendor agreements, and loan documents may require certain coverages, limits, certificates, or additional insured wording. The policy and contract should be reviewed together.

Sources

The sources for this guide include NAIC small business insurance materials, NAIC business interruption and business owners policy guidance, Texas Department of Insurance commercial general liability information, and Insurance Information Institute material on business owners policies.

Insurance disclaimer

This guide is for general educational information only. It does not provide personalized insurance, legal, tax, or financial advice. Coverage and rules vary by insurer, policy, and state.