Commercial General Liability Insurance: Complete Guide
What a CGL policy covers, what it excludes, how coverage limits work, and how to choose the right policy for your California small business or contracting operation.
Quick Answer
Commercial general liability (CGL) insurance is a business insurance policy that covers third-party claims for bodily injury, property damage, advertising injury, and completed operations. The standard policy provides $1 million per occurrence and $2 million aggregate coverage. In California, most small businesses pay between $35 and $400 per month depending on their industry and revenue.
What Is Commercial General Liability Insurance?
Commercial general liability insurance — often shortened to CGL or GL — is a foundational business insurance policy that protects your company from third-party claims. "Third party" means someone who isn't you or your employee — clients, customers, vendors, passersby, or anyone else who might be harmed by your business operations.
The "general" in CGL distinguishes it from specialized liability policies like professional liability, which covers service errors, or product liability, which covers defective products exclusively. CGL is the broadest liability policy available to most businesses, which is why it's the starting point for nearly every commercial insurance program.
Most CGL policies follow standardized ISO form language. This means the basic coverage structure is similar across carriers, though exclusions, endorsements, and pricing vary significantly. A $1M/$2M CGL policy from Carrier A and Carrier B may look the same on paper but differ substantially in what they actually cover — which is why working with a specialist matters.
What a CGL Policy Covers
Bodily Injury Liability
If a third party — a client, customer, or passerby — is injured because of your business operations, your CGL policy pays for their medical expenses, lost wages, pain and suffering, and any legal defense costs and settlements if they sue you.
Example
A customer slips and falls in your retail store and breaks their wrist. Your CGL pays their medical bills and covers the settlement.
Property Damage Liability
If your operations accidentally damage someone else's property — their building, equipment, vehicles, or belongings — property damage coverage pays for the repair or replacement cost.
Example
You're a plumber working in a client's kitchen and accidentally crack a tile countertop. CGL covers the repair.
Completed Operations Coverage
Claims that arise after you've finished a job are covered under completed operations. This is critical for contractors — a client can sue you six months after project completion for alleged defective work.
Example
A roofing contractor finishes a job in March. In November, the roof leaks and causes interior damage. Completed operations coverage applies.
Personal & Advertising Injury
Covers claims of libel, slander, copyright infringement, wrongful eviction, and false advertising arising from your business's marketing and promotional activities — not from bodily injury or property damage.
Example
A competitor claims your ad copy copied their slogan. CGL's advertising injury coverage pays your legal defense.
Medical Payments
Pays for minor medical expenses for third parties injured at your business location, regardless of fault. This is a 'goodwill' coverage designed to handle small claims quickly without litigation.
Example
A vendor twists their ankle stepping into your warehouse. Medical payments coverage covers the ER visit without a lawsuit.
Products Liability
If you manufacture, sell, or distribute a product and someone is injured or their property is damaged by that product, products liability coverage — included in most CGL policies — applies.
Example
You sell cleaning products and a formulation causes skin irritation. Products liability covers the resulting claims.
What CGL Insurance Does NOT Cover
Understanding exclusions is as important as understanding coverages. The most common gaps that catch small business owners off guard:
Understanding CGL Coverage Limits
Every CGL policy has two main limits: the per-occurrence limit (maximum paid for one single event) and the aggregate limit (maximum paid across all claims during the policy year). The most common structure is $1 million per occurrence / $2 million aggregate.
| Limit Structure | Best For | Note |
|---|---|---|
| $300K / $600K | Solo operators, low-risk businesses | May not satisfy most contract requirements |
| $500K / $1M | Small service businesses, consultants | Meets some client minimum thresholds |
| $1M / $2M | Most contractors and small businesses | Standard requirement from most GCs and landlords |
| $2M / $4M | Mid-size contractors, higher-risk operations | Required on larger projects and government contracts |
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