General Liability Insurance FAQ

Commercial general liability (CGL) insurance is a policy that protects businesses against third-party claims for bodily injury, property damage, and advertising injury. If a client is injured on your job site, you accidentally damage someone's property, or a lawsuit is filed over your marketing materials, CGL covers legal defense costs and settlements up to your policy limits.

A standard CGL policy covers four main categories: bodily injury (someone injured because of your business operations), property damage (damage you cause to someone else's property), personal and advertising injury (defamation, copyright infringement, false advertising), and completed operations (claims arising from work you've already finished). Defense costs are included in the policy, not deducted from your coverage limits.

A CGL policy does not cover your own employees' work injuries (workers' compensation covers that), damage to your own property or equipment, professional errors and omissions (that's a separate E&O policy), commercial auto accidents, intentional wrongful acts, or liquor liability (which requires a separate liquor liability policy). Understanding what's excluded is as important as knowing what's included.

General liability covers physical risks — bodily injury, property damage, and advertising injury from your business operations. Professional liability (also called errors and omissions or E&O) covers claims arising from your professional advice, services, or failure to deliver promised results. Many businesses need both: a contractor needs CGL for job site risks and might need E&O if they provide design consulting; a software company needs E&O for service failures and CGL for their office and client interactions.

Most small businesses in California pay between $38 and $200 per month for a standard CGL policy. The range is wide because it depends on your business type, annual revenue, number of employees, and risk profile. Low-risk businesses like consultants or cleaners are at the lower end. High-risk trades like roofing contractors or manufacturers are at the higher end.

The main pricing factors are: type of business and operations, annual revenue or payroll, number of employees and subcontractors, policy limits and deductibles, claims history, years in business, and location. A roofing contractor with 10 employees and prior claims will pay significantly more than a solo cleaning service with a clean history.

Most commercial general liability policies are written on an annual basis, but monthly payment plans are available through most carriers. There may be a small finance fee for monthly billing. Some policies allow quarterly or semi-annual payments as alternatives.

Most small businesses start with $1 million per occurrence and $2 million aggregate. Per occurrence is the maximum paid for a single claim. Aggregate is the total amount available in a policy year. Many commercial contracts and lease agreements specify minimum required limits — often $1M per occurrence. Higher-risk businesses, larger commercial clients, or businesses with significant assets may want higher limits.

Per occurrence is the maximum your policy will pay for any single claim or incident. Aggregate is the total maximum your policy will pay across all claims during the policy period (usually one year). If you have a $1M per occurrence and $2M aggregate policy, a single large claim can use up to $1M, and your total payout across all claims in the year is capped at $2M.

Completed operations coverage protects you against claims that arise after a job is finished. If a plumbing repair develops a leak three months after completion, or electrical work causes a problem discovered later, completed operations coverage applies. It's included in standard CGL policies and is one of the most important protections for contractors and service businesses.

A certificate of insurance is a document that summarizes your insurance coverage — carrier, policy number, coverage types, limits, and effective dates. It proves to a third party (client, landlord, GC, property manager) that your coverage is active. It does not transfer any rights under the policy to the certificate holder — it's proof of coverage, not a policy amendment.

Once your policy is active, a COI can typically be issued the same day — often within a few hours. In urgent situations, some carriers can produce a COI within the hour. If you're adding a new certificate holder (client or landlord requiring additional insured status), that may take a bit longer depending on the endorsement required.

An additional insured endorsement adds another party to your policy as an insured — usually a client, property owner, or general contractor who is requiring it as a condition of doing business with you. If a claim arises from your operations, the additional insured can also be defended under your policy. This is different from simply being listed on a COI.

California doesn't require LLCs to carry general liability insurance by law. But forming an LLC doesn't eliminate third-party liability — it only protects your personal assets from business debts. A client injured by your business operations can still sue the LLC. General liability insurance pays for legal defense and settlements, which your LLC formation doesn't cover.

CSLB licensing doesn't mandate it, but the market does. Commercial projects, GCs, property managers, city permit departments, and most sophisticated private clients require proof of general liability coverage before you start work. Practically speaking, you can't compete for commercial or larger residential work without it.

No — they cover completely different things. General liability covers third-party claims — injury or damage to people outside your business. Workers' compensation covers your employees when they're injured on the job. California requires workers' compensation for any business with employees. Both policies are often needed, but they work independently.