Guide to General Liability Insurance for Small Business Owners — Backoffice (2022)

When Henry Walker went to get a watermelon at Walmart, he didn’t expect to end up disabled. But that’s exactly what happened: his foot got stuck in a pallet as he reached for the watermelon, and he fell so hard that he fractured his hip. When the case was brought to court, they found video evidence that Walker wasn’t the first person to get tangled up in the pallet, and the court awarded him $7.5 million in damages. 

But Walmart didn’t have to pay that settlement out of pocket. Instead, it’s extremely likely that its general liability insurance covered the costs. And while it’s unlikely that your business would be hit with a settlement that big, even a moderately sized lawsuit can be devastating for small business owners.

What is general liability insurance?

General liability insurance is a type of business insurance that covers you in the case of general third-party claims against your business, including bodily injury and property damage. It’s also sometimes called business liability insurance or commercial general liability insurance.

What does general liability insurance cover?

Despite the fact that it has “general” in the name, general liability insurance provides liability coverage for claims related to a few specific things: a customer getting injured at your place of business, you or an employee damaging customer property, reputational damage you cause to someone else, and advertising injuries like copyright infringement.

How does general liability insurance work?

General liability insurance provides third-party coverage, which means the payments go to the third party involved in the claim, not to you directly. You’re considered the “first party,” and the “third party” is a person who has been injured—either physically, financially, or reputationally.

Some examples of claims that general liability insurance would cover include:

General liability insurance coverage does not cover:

General liability insurance FAQ

What does general liability insurance typically cover?

General liability insurance typically covers claims related to a customer getting injured at your place of business, an employee damaging customer property, reputational damage, and advertising injuries like copyright infringement.

What is the difference between professional liability and general liability insurance?

General liability insurance covers claims related to physical risks like bodily injury and third-party property damage. Professional liability insurance covers intangible risks like damages due to errors and omissions, which is when your client suffers from a financial loss because of bad advice or another mistake you make.

Is general liability based on revenue?

No, general liability is not based on revenue. Instead, it’s based primarily on how risky your business is. Other factors that might affect the cost of general liability include how many employees you have, where you’re located, how old your company is, and previous insurance claims.