Insurance Archaeology

How Much CGL Insurance Should a Business Have?

Ben Pariser


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Commercial General Liability (CGL) insurance is a fundamental policy designed to protect businesses from financial losses due to claims of bodily injury, property damage, and personal and advertising injury that occur as a result of their business activities. This type of insurance is crucial for covering incidents that can arise from day-to-day operations, whether it’s an accident on the company’s property or damages caused by the business’s products or operations.

The importance of CGL insurance cannot be overstated for any business entity. It serves as the first line of defense against common lawsuits, providing financial protection that helps businesses avoid significant out-of-pocket expenses. By covering legal defense costs and potential damages awarded in lawsuits, CGL insurance ensures that a business can continue its operations without the debilitating financial setbacks that might otherwise occur due to claims and legal actions.

Determining the Right Amount of CGL Insurance

Determining the appropriate amount of Commercial General Liability (CGL) insurance for a business is vital for ensuring financial and legal security. Small to medium-sized businesses should have CGL policies with at least $1 million per occurrence and a $2 million aggregate limit. Larger businesses, or those with higher risk exposures, should have at least $5 million per occurrence. Making sure that any and all related documents are in order is critical, especially if an insurance policy needs to be reconstructed.

Nature of Business’s Operations

The type of business activities influences the risk level. Industries prone to accidents, such as construction or manufacturing, usually require higher coverage limits due to the increased risk of bodily injury and property damage.

Business’s Premises and Job Site Risks

The location and nature of the business premises also affect the necessary coverage amount. Sites with heavy machinery, frequent public interaction, or hazardous materials carry higher risks and consequently need more substantial insurance protection.

Legal Requirements and Contractual Obligations

Some business sectors or contracts may mandate specific minimum insurance coverages. Not meeting these requirements can lead to legal repercussions or missed business opportunities.

Asset Protection

It’s crucial to align the coverage amount with the total value of the business’s assets. Adequate coverage ensures that a company can withstand financial impacts from claims without jeopardizing its operations or survival.

Financial Capability and Premium Costs

Balancing the cost of insurance premiums with the level of coverage needed is essential, as well as making sure your insurance coverage schedule is established and maintained. Businesses must ensure the premiums are affordable while still providing sufficient coverage to protect against potential claims.

Industry Standards and Practices

Comparing coverage levels with those held by peers in the same industry can help a business gauge if it is under or over-insured. Adhering to industry norms helps maintain competitive and legal standing.

Businesses should conduct regular policy reviews and adjustments to ensure their CGL insurance coverage keeps pace with changes in their operations, assets, and industry regulations. This proactive approach helps maintain optimal protection as the company evolves.

What CGL Insurance Coverage and Exclusions

Commonly Covered

Commercial General Liability (CGL) insurance provides broad protection against several common risks faced by businesses. Here is an overview of what is typically covered under a commercial general liability policy:

  • Bodily Injuries: Coverage for physical harm to a person at your business premises or from your operations, often including necessary medical expenses.
  • Property Damage: Protection against damage to another person’s property due to your business activities. This includes incidents occurring at your business’s premises or through operations conducted offsite.
  • Personal and Advertising Injury Claims: Addresses legal liabilities arising from advertising, slander, libel, and privacy violations. These policies specifically cover advertising injury claims that involve misrepresentation or copyright infringement affecting another business or individual.
  • Legal Defense Costs: CGL insurance typically covers the legal costs associated with defending against claims, regardless of the outcome. This can include attorneys’ fees, court costs, and settlements or judgments.
  • Customer Slips and Falls: Specifically covers incidents where a customer slips or falls on your premises, which is one of the most common liability claims for many businesses.
  • Medical Payments Coverage: Offers compensation for medical treatment for injuries sustained on your property or due to your operations, helping to settle claims without legal action.

Common Exclusions

While Commercial General Liability (CGL) insurance is extensive, it does not cover all types of liabilities and as a potentially responsible party you must be familiar with these exclusions. Understanding these exclusions is crucial for businesses to ensure they are fully protected by additional policies if needed. Here are some common exclusions from a standard CGL policy:

  • Intentional Injuries: Any injuries or damages that result from intentional acts, rather than accidents, are typically not covered. This includes acts known to cause harm.
  • Professional Services: CGL policies do not cover liabilities arising from errors, omissions, or professional advice. Businesses that provide professional services may require professional liability insurance to cover these risks.
  • Employment Practices: Issues related to employment such as discrimination, harassment, and wrongful termination are not covered by CGL insurance. These require employment practices liability insurance (EPLI).
  • Pollution: Damages resulting from the release of pollutants, which can occur during regular business operations, are excluded under standard CGL policies. Pollution liability insurance is needed to address these specific risks.
  • Cyber Liability: CGL policies generally exclude cyber risks such as data breaches or cyber-attacks. Cyber liability insurance is necessary to protect against these increasingly common threats.

Additional Coverage and Endorsements

To enhance the scope of protection beyond standard Commercial General Liability (CGL) insurance, businesses often need additional coverage and endorsements. These adjustments tailor coverage to specific business needs and address gaps that could leave a company vulnerable to financial risks. For instance, adding endorsements can modify the terms and conditions of the original policy, making it more comprehensive.

Professional liability insurance is essential for businesses that offer professional services or advice, which are not covered under standard CGL policies. This insurance protects against claims arising from professional errors, omissions, or negligence that can lead to significant financial losses for clients. It’s particularly important for professionals such as consultants, architects, and engineers.

Workers compensation insurance is necessary to cover injuries that employees might suffer in the course of their employment, complementing the coverage that CGL provides for third-party injuries. Required by law in most jurisdictions, it provides medical benefits and wage replacement to injured workers, while protecting employers from lawsuits by those workers.

Excess liability coverage, or umbrella insurance, provides an additional layer of security by extending coverage limits beyond those provided by existing liability policies, including CGL. This type of coverage is vital when the costs of claims exceed the limits of a business’s primary insurance policies, offering protection against large-scale financial impacts that could threaten a business’s stability.

Cost Considerations

When considering the cost of Commercial General Liability (CGL) insurance, it’s important to understand the factors that affect premium costs. These factors include the nature of the business, the level of risk associated with its operations, the coverage limits selected, and the company’s claim history. High-risk industries such as construction might face higher premiums due to the increased likelihood of costly claims. Additionally, businesses located in areas prone to litigation may also see elevated insurance costs.

Balancing cost with risk is crucial in determining how much insurance is enough. Businesses need to evaluate their potential exposure to lawsuits and the possible financial repercussions of such legal actions. Opting for lower premiums by reducing coverage might save money in the short term, but it can lead to devastating financial consequences if a major claim exceeds policy limits. Therefore, it’s advisable for businesses to carefully assess their risk and choose a level of insurance that provides adequate financial protection while still being cost-effective.

Ultimately, the goal is to achieve a balance where the insurance coverage is sufficient to protect the business’s assets without overextending on unnecessary or overly expensive policies. Regular reviews and adjustments to insurance coverage, in consultation with an insurance company, can help ensure that a business remains adequately protected as it grows and its risk profile changes.

Ensuring Comprehensive Protection with CGL Insurance

Securing sufficient Commercial General Liability (CGL) insurance is crucial for any business aiming to protect itself against potential financial and legal issues. This foundational coverage shields businesses from claims related to bodily injury, property damage, and personal and advertising injury, which are typical risks in daily operations.

As businesses expand and their operational landscapes evolve, it becomes essential to regularly review and update their insurance coverage. This ensures that the coverage adapts to changes in business size, scope, and regulatory requirements, maintaining adequate protection at all times.

Restorical Research is adept at assisting businesses with their CGL insurance needs. For expert guidance on adjusting existing policies or securing new coverage that meets your evolving business requirements, contact Restorical Research. Our professionals are ready to address any questions or queries you might have, helping to ensure that your business remains resilient and well-protected.


What does commercial general liability insurance cover?

Commercial general liability insurance provides coverage for bodily injury, property damage, and personal injury claims that arise during normal business operations. This type of insurance policy is crucial for protecting businesses against common risks.

How does general liability insurance coverage differ from a business owners policy?

While a business owners policy (BOP) includes general liability coverage along with property and other types of insurance, general liability insurance specifically covers claims related to bodily injury, property damage, and personal and advertising injury.

What are the typical settlement costs covered by a general liability insurance policy?

General liability insurance helps cover settlement costs related to legal claims, including court fees, judgment awards, and medical bills associated with customer slipping or other injuries on the client’s property.

Can general liability insurance cover property damage claims?

Yes, general liability insurance policies provide coverage for property damage claims, helping to protect businesses from financial losses when they are legally responsible for damage to another party’s property.

What should small business owners know about general liability insurance?

Small business owners should understand that general liability insurance is essential for protecting against claims that could otherwise be financially devastating. Coverage typically includes customer injuries, property damage, and legal defense costs.

How does a CGL insurance policy protect against employee injuries?

While a CGL insurance policy primarily covers third-party claims, it can intersect with workers’ compensation insurance by providing coverage for legal defense if an employee files a liability claim against the business.

In what situations will an insurance company pay under commercial general liability coverage?

An insurance company will pay under a commercial general liability policy when a covered event occurs, such as property damage or bodily injury to a third party, up to the maximum amount stated in the policy.

How does general liability insurance coverage help in managing legal counsel costs?

General liability insurance often covers legal counsel costs associated with defending against liability claims, ensuring that businesses can afford proper legal representation without compromising their financial stability.

What types of incidents does commercial general liability coverage typically exclude?

Commercial general liability coverage typically excludes intentional acts, professional errors, and employment practices. Businesses may need additional policies like professional liability or employment practices liability insurance for these risks.

Why is it important for businesses to regularly review their general liability insurance policy?

Regular reviews of a general liability insurance policy ensure that coverage keeps pace with changes in the business, such as expansion, increased risk exposure, or new regulatory requirements. This helps maintain adequate protection as the business evolves.

We are not attorneys, this is not legal advice. 

Ben Pariser

One of Ben’s favorite parts of insurance archeology is knowing Restorical is making a difference, helping to clean up the environment one polluted property at a time while also changing people’s lives.


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