Haris Ashley
Commercial general liability insurance (CGL) is a type of insurance that helps protect businesses from common incidents, including bodily injury, property damage, and personal and advertising injury (e.g. slander and false advertising). CGL insurance is not mandatory, but it can help businesses of all sizes navigate lawsuits and claims, covering legal and medical costs. The cost of CGL insurance varies depending on the business's specific needs and level of risk, with higher-risk businesses facing higher rates. It's important to note that CGL doesn't cover all claims, and businesses may need additional liability coverage to protect against other risks.
| Characteristics | Values |
|---|---|
| Purpose | To protect businesses from financial risk due to lawsuits and claims |
| Coverage | Bodily injury, property damage, personal injury, advertising injury, medical payments, legal costs, etc. |
| Suitability | Businesses of all sizes, especially small businesses |
| Types of policies | Claims-made, occurrence, premises, products/completed operations, excess, umbrella |
| Cost | Varies based on business type, location, profession, number of employees, etc. |
| Average annual premium | $810 on average, $60 median |
| Additional coverages | Professional liability, employment practices liability, workers' compensation, product liability, commercial auto insurance, etc. |
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What You'll Learn
Commercial general liability insurance (CGL)
CGL insurance typically includes premises coverage, which protects businesses from claims that occur on their physical location during regular business operations. It also covers bodily injury and property damage that is the result of a finished product or service provided at another location. Additionally, CGL insurance may cover the cost of any accidental damages caused by the business's operations or the legal costs of defending a lawsuit. It is important to note that CGL insurance does not cover all claims, and there may be exclusions or restrictions on what is covered. For example, CGL insurance typically does not cover intentional or expected damage, damages due to intoxication or pollution, or accidents involving vehicles, aircraft, or watercraft.
The cost of CGL insurance depends on various factors, including the size of the business, the riskiness of its operations, the location of the business, revenue, and the amount of coverage needed. Businesses can also choose to purchase additional liability coverages to protect against risks that are not covered by CGL insurance, such as professional liability insurance, employment practices liability insurance, and workers' compensation insurance.
CGL insurance is an important form of protection for businesses of all sizes, as it helps safeguard them from the economic fallout of common incidents that can occur while running a business. Without CGL insurance, businesses may be exposed to significant financial risk in the event of a lawsuit or claim. By understanding the coverage provided by CGL insurance and working with insurance professionals, businesses can ensure they have the necessary protection in place to manage their unique risks effectively.
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Claims-made vs occurrence policies
Commercial general liability insurance (CGL) is a form of comprehensive insurance that offers businesses coverage in the event of damage or injury caused by their operations, products, or on their premises. CGL policies can also cover the legal costs of defending a lawsuit.
There are two types of CGL policies: claims-made policies and occurrence policies. Claims-made policies cover claims made during the policy period, regardless of when the event took place. This type of policy usually includes a retroactive date, which is a cut-off date after which acts are covered. Claims-made policies may also include an extended reporting period, also known as tail coverage, which covers claims made for a specified time after the policy expires.
Occurrence policies, on the other hand, cover incidents that happen during the policy period, regardless of when the claim is filed. This means that an occurrence policy can cover a claim filed years after the incident, as long as it occurred during the policy period. Occurrence policies can be more expensive than claims-made policies because of the extended length of coverage.
Examples of occurrence-based policies include general liability, commercial auto, and umbrella liability insurance. Claims-made policies are more commonly found in directors and officers coverage and professional liability insurance, which is also referred to as errors and omissions insurance.
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Coverage for bodily injury and property damage
Commercial general liability (CGL) insurance is a type of policy that provides businesses with coverage for bodily injury, personal injury, and property damage. This insurance is considered comprehensive, although it does not cover all the liability risks a business may face. For example, CGL does not cover intentional damages or accidents involving vehicles, aircraft, or watercraft.
Bodily injury coverage protects businesses in the event that a customer or non-employee is injured on their premises. This includes injuries caused by falling objects, slips, and falls. CGL can also cover medical payments for injuries sustained by non-employees caused by an accident that takes place on the insured’s premises or due to exposure to the insured’s business operations. This coverage can provide prompt settlement of smaller medical claims without litigation, covering reasonable medical, surgical, ambulance, hospital, professional nursing, and funeral expenses.
Property damage protection covers any damage caused to other people's property while the insured business is on the job. This includes damage caused by the business's operations, products, or services, even if they are performed at another location. For example, if a business's operations cause pollution, CGL can provide liability protection for first-party and third-party environmental liabilities and pollution clean-up costs.
The cost of CGL insurance depends on the size of the business, the riskiness of its operations, the amount of coverage needed, and other factors. Businesses can purchase additional coverage for risks not covered by CGL, such as professional liability insurance, employment practices liability insurance, and cyber insurance.
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Additional insureds and exclusions
Commercial general liability insurance (CGL) is a type of comprehensive insurance that offers coverage in the event of damage or injury caused by a business's operations, products, or on its premises. It helps protect businesses from financial losses due to liability claims arising from injury or property damage. CGL insurance is important for businesses of all sizes, and it can help them navigate lawsuits and claims.
Additional insureds
Companies can add other companies or individuals they contract with to their commercial liability insurance policy as "additional insureds". This means that the insurance policy will cover the additional insureds in the event of a claim.
Exclusions
While CGL policies provide broad coverage, they do not cover all risks. Some common exclusions found in CGL policies include:
- Expected or intended harm: Injuries or damage that the policyholder intentionally caused are typically excluded.
- Contractual obligations: Contractual liability arising from assumed contractual obligations is usually excluded. For example, if the policyholder signs a contract agreeing to indemnify another party and then faces a claim from them, a CGL policy would likely not provide coverage.
- Pollution: Pollution-related claims are typically excluded from CGL policies and require separate pollution liability insurance.
- Aircraft/watercraft: Claims involving aircraft or watercraft are generally excluded from CGL policies.
- Professional services: Professional liability claims, also known as errors and omissions insurance, are typically excluded from CGL policies.
- Workers' compensation: Workers' compensation claims are excluded from CGL policies and require separate insurance.
- Auto liability: Claims involving automobiles, aircraft, or watercraft are excluded from CGL policies. Commercial auto insurance is typically needed to cover these risks.
- Catastrophic risks: CGL policies may not cover claims related to catastrophic events, such as natural disasters or "hostile acts" like war.
It is important to carefully review the specific terms and conditions of a CGL policy, as they can contain complex legal terms and exclusions that may be difficult to understand without legal training. Consulting with an attorney or insurance professional can help business owners make informed decisions about the coverage that best suits their unique needs.
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The cost of general liability insurance
Commercial general liability insurance (CGL) is a type of comprehensive insurance that provides coverage for bodily injury, personal injury, and property damage caused by a business's operations, products, or on its premises. It helps small business owners navigate lawsuits and claims and protects them from financial risk. The cost of general liability insurance varies depending on several factors, and businesses should consider their specific needs and risks when determining the appropriate coverage and cost.
The size and experience of a business also play a role in determining the cost of general liability insurance. Newer small businesses may pay more for insurance due to their lack of experience, while established companies with clean claims histories can benefit from lower rates. The number of employees can also impact the cost, as a larger workforce increases the chances of accidents and mistakes, leading to higher premiums.
The amount of coverage selected affects the cost, with higher coverage limits resulting in higher premiums. A $1 million/$2 million policy, for instance, is typically more expensive than a $1 million/$1 million policy. Businesses should carefully consider their financial risk tolerance and select coverage limits accordingly. Additionally, the policy limit amount and deductible chosen can impact the cost, with higher coverage limits generally leading to higher insurance costs.
Businesses can also explore discounts and savings opportunities to reduce the cost of general liability insurance. Carriers may offer discounts for paying in full or having multiple policies with them. Combining general liability insurance with other types of insurance, such as commercial property insurance or professional liability insurance, can result in significant savings. Obtaining quotes from different providers and understanding their specific needs can help businesses find the right balance between cost and coverage.
While the cost of general liability insurance varies, some sources provide average figures to give a general idea. For example, The Hartford mentions an average annual premium of $810, or about $68 per month, for their customers. Progressive reports that their new customers in 2024 paid an average of $85 per month. NEXT mentions a range of costs, with some businesses paying as little as $19 monthly, while nearly half of their customers pay less than $45 per month. Chubb provides an average cost for a $1 million liability insurance policy, quoting $69 per month or $824 per year.
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Frequently asked questions
Commercial general liability insurance (CGL) is a form of comprehensive insurance that offers coverage in case of damage or injury caused by a business’s operations or products, or on its premises. It is considered the "first line" of coverage that a business typically purchases.
Commercial general liability insurance covers bodily injury, property damage, and personal and advertising injury (slander and false advertising). It also covers medical payments.
Commercial general liability insurance is important for businesses of all sizes. It is not required by law, but it can help protect your business from costly legal and medical bills related to covered events.
The cost of commercial general liability insurance varies depending on specific features of your business, such as your profession, number of employees, type of business, location, and more. The national median cost of general liability insurance in 2024 was $60 per month, while the average price was $85 per month.
