How to Choose General Liability Coverage for a Small Business

Calculate coverage limits, compare policy types, and structure GL insurance that protects assets without overpaying for unnecessary coverage.

  1. Calculate your base coverage floor. Start with combined single limit coverage equal to 2-3x your business net worth plus one year of gross revenue. A business with $500K net worth and $1M annual revenue needs $2M-$2.5M minimum coverage. This covers most slip-and-fall, property damage, and advertising injury claims without wiping out your assets.
  2. Map your specific exposure points. List every way your business could cause bodily injury or property damage to others. Retail stores face slip-and-fall risks; contractors face property damage exposure; service businesses face professional liability gaps that GL won't cover. Higher-exposure businesses need the upper end of coverage ranges or additional policies.
  3. Compare occurrence vs claims-made policies. Occurrence policies cover incidents that happen during the policy period, regardless of when claims are filed. Claims-made policies only cover claims filed while the policy is active. Occurrence costs 15-25% more but eliminates tail coverage gaps if you switch insurers.
  4. Structure limits across categories. Split coverage between per-occurrence limits and aggregate annual limits. Standard structure: $1M per occurrence, $2M aggregate for smaller businesses; $2M per occurrence, $4M aggregate for higher-exposure operations. Keep aggregate limits at least 2x the per-occurrence amount to handle multiple claims.
  5. Add umbrella coverage for high limits. Buy umbrella liability for coverage above $2M rather than increasing GL limits. Umbrella policies cost $200-$500 annually per $1M of coverage versus $800-$2000 to increase GL limits. Requires underlying GL coverage of at least $1M to qualify.
  6. Review exclusions and add endorsements. Standard GL excludes professional services, employment practices, cyber liability, and pollution. Add endorsements for coverage gaps specific to your business or buy separate policies. Budget an additional 10-30% of your base premium for necessary endorsements.