What is a Commercial General Liability (CGL)?

Commercial general liability (CGL) is like an umbrella…

You won’t need your umbrella every day. In fact, you hope you never need it But if you see a storm brewing, you’ll be glad you’ve got that umbrella. Likewise, CGL protects your business if something unpleasant happens. It’s a comprehensive insurance policy your company hopefully won’t need very often, but if something bad happens and your company is liable, CGL insurance can protect your business from the need to pay huge bills.

Commercial general liability (CGL) is a form of comprehensive insurance coverage that helps protect businesses from accidental bodily injury or property damage that takes place on their premises or as a result of their company’s operations. CGL is a standard form of commercial liability insurance in the United States because it offers companies such a broad range of coverage.

CGL is often called general liability insurance or business liability insurance. When you have a CGL policy and somebody makes a claim against your business that the policy covers, your insurance company must help your business pay damages to the claimant. That might include medical bills, legal fees, or the costs of repairing or replacing damaged property.

A commercial general liability (CGL) policy typically has three types of coverage: premises liability, product liability, and completed operations.

Premises liability protects business owners if a customer or visitor is hurt while on your premises or because of your business operations. For example, if a customer breaks their arm while visiting your store, or your faulty sprinkler system ruins their expensive fur coat.

It’s often called public or personal liability, because it protects your business from personal damages or injuries that occur on-site. It sometimes gets lumped in with advertising liability, or advertising injury, which is considered to be akin to personal injury. That's when somebody alleges your company’s advertising of its goods and services has defamed or otherwise injured them.

The product liability portion of a CGL policy helps protect your business if the products you've made or sold hurt a customer or damage their property.

Completed operations liability protects your business if any bodily harm or damage to personal property happens because of your work. Let's say you're a carpenter. If a deck you’ve built breaks and results in a twisted ankle, completed operations liability coverage should help pay the customer’s medical bills.

Most CGL policies have limits on how much they will pay per claim. Businesses often purchase excess liability coverage as well if they’re worried that any potential claims may go over the amount the insurance company is willing to cover. For example, many companies purchase additional coverage specifically for product liability, especially if they’re in an industry like pharmaceuticals where the products could cause injury if they’re defective or improperly used.

CGL policies generally don't cover intentional injury or deliberate property damage. If someone was hurt on your premises but it wasn’t an accident, or if you damage someone’s property on purpose, your insurance provider probably won’t pick up the tab.

CGL policies don’t protect business assets like buildings, equipment, or other property. If a customer accidentally breaks your self-checkout terminal, your CGL policy won’t cover the damages. Different business insurance policies exist for that type of coverage.

What CGL does and doesn't cover typically varies based on provider and policy. You should do your homework and understand what a CGL policy doesn't cover before you purchase it.

Beyond types of coverage, a business will typically need to choose between two different kinds of CGL policies: a claims-made policy or an occurrence policy.

A claims-made CGL policy offers businesses coverage whenever a claim takes place, as long as the policy is still active. If you take out a 12-month CGL policy and a customer makes an accidental injury claim against you at any point during that period, you’ll be covered. But if somebody makes a claim after your policy has expired, you’re unprotected.

An occurrence policy covers a business against any incidents that occur during the time in which the policy was active — even after it's expired. Let’s say you’ve got a CGL occurrence policy in force from January 2021 until January 2022. If somebody claims they slipped on your cafe floor in December 2021, but the claim is filed in February 2022, your old policy will cover you for their injuries. That’s because the alleged event happened during your coverage period — it doesn’t matter that the policy expired.

There's no difference between commercial general liability (CGL) and general liability insurance. Some insurance providers will market their CGL insurance policies as “general liability policies” or “business liability policies,” but they’re the same as CGL.

The cost of a commercial general liability (CGL) insurance policy varies from business to business. The cost depends on several factors, including how big or small a deductible you want. A deductible is the total amount of money you must pay before your insurance provider starts to cover any costs associated with a claim that’s been made against you.

For example, your policy might stipulate that the insurer will cover medical costs exceeding $5,000 if you somebody gets hurt in your store. The $5,000 is your deductible. That means if your business gets landed with a hospital bill for $3,000, your insurer is unlikely to help you foot the bill. Insurance providers generally offer lower deductible levels in exchange for higher premiums.

CGL policies also have caps on how much the insurer will pay on a given claim. But a policyholder can buy an added policy for excess insurance coverage that provides for higher limits. If the maximum payout on a claim is $5,000 under a CGL policy, for instance, you can buy excess coverage that raises the limit to $10,000.

According to the U.S. Chamber of Commerce, only 13% of businesses pay more than $1,000 a year for CGL policies. Premiums generally average less than $800 a year.

The amount of commercial general liability (CGL) coverage your business may need depends on a lot of factors. For example, if your business is large, chances are you’re exposed to more risks, so you’d have a higher volume of claims and need more coverage.

To determine how much CGL insurance your business needs, you should consider your business requirements, your risks, and the potential impact if any of those risks materialize. Many insurance providers will work with business customers to adjust coverage amounts through add-on coverage or umbrella insurance, a type of coverage that covers claims that go above and beyond those covered by a normal CGL policy.