Are you confident your insurance coverage would hold up in court – or collapse under pressure?
Do you know what those general liability numbers on your policy actually protect – and what they don’t?
This guide breaks down general liability insurance limits, what “per occurrence” and “aggregate” mean, how to estimate
what you need, and what happens if you guess wrong.
What Is General Liability Insurance – and Why It’s Essential
General liability insurance is your business’s financial safety net. It protects you against lawsuits, accidents, property
damage, and advertising-related claims.
You might need proof of this insurance to sign a lease, work with a new client, or bid on jobs – but the real question is:
are your limits high enough?
What It Covers
- Bodily Injury: Covers medical and legal costs if someone is injured due to your business.
- Property Damage: Pays for damage your business causes to others’ property.
- Personal & Advertising Injury: Covers claims like libel or copyright infringement.
Example: A spilled coffee on a client’s laptop ends up costing $10,000 in replacement and recovery.
The Cost of Getting It Wrong
A lawsuit can cost $50,000-$100,000 even if you win. Legal defense, lost contracts, and client distrust all follow.
Underinsurance can shut down your business.
Per Occurrence vs. Aggregate Limits
Per Occurrence: Max paid for a single claim.
Aggregate: Max for all claims during the policy year.
Think of per occurrence as one-time protection and aggregate as your annual shield.
Common Coverage Packages
$1M/$2M: For small businesses
$2M/$4M: For higher traffic or higher risk
$5M+: For construction or healthcare
How to Choose the Right Coverage
Ask:
- What assets am I protecting?
- What’s my contract size?
- What do clients require?
Understanding General Liability Limits
General liability policies are sold with two key limit figures—your per-occurrence limit and your aggregate limit—but those headline numbers don’t tell the whole story. To make sure you’re truly protected, let’s unpack exactly what these limits mean, what they include, and what they leave exposed.
1. Per-Occurrence vs. Aggregate: The Basics
- Per-Occurrence Limit
- This is the most your insurer will pay for a single claim or incident (e.g., one slip-and-fall lawsuit).
- Example: If your per-occurrence limit is $1 million and a vendor sues you for $1.2 million after you damage their equipment, you’ll be on the hook for the extra $200 k.
- Aggregate Limit
- This is the total amount the insurer will pay across all claims during the policy year.
- Example: With a $1 million per-occurrence limit and a $2 million aggregate limit, you could handle two separate $1 million claims—after that, you’re on your own.
2. What Those Limits Actually Protect
Your general liability policy will typically respond to the following exposures up to your policy limits:
| Exposure | Covered? | Limit Applies To |
|---|---|---|
| Bodily Injury | ✔️ Medical bills, settlements, defense costs | Per occurrence & part of aggregate |
| Property Damage | ✔️ Repair/replacement costs | Per occurrence & aggregate |
| Personal & Advertising Injury | ✔️ Libel, slander, copyright infringement defense and awards | Per occurrence & aggregate |
| Legal Defense Costs | ✔️ Included in each limit | Erodes per-occurrence/aggregate limits |
Key point: Defense costs are typically included within your limits. A protracted lawsuit can gobble up your entire limit even before any damages are paid.
3. Common Gaps & Exclusions
General liability does not cover everything. Watch for these gaps:
- Professional Services Errors – Claims alleging negligence in your core professional advice or services usually require a separate Professional Liability (E&O) policy.
- Pollution/Environmental – Cleanup costs for chemical spills or pollution may need a Pollution Liability endorsement.
- Automobile Liability – Damage or injury from business vehicles is covered under your Commercial Auto policy, not general liability.
- Employee Injuries – Workers’ Compensation handles on-the-job injuries to your own employees.
- Cyber/Data Breach – Lawsuits or fines stemming from a data breach typically fall under a Cyber Liability policy.
4. Industry Benchmarks & When They Fall Short
Use these benchmarks as a starting point—but never blindly copy them:
- Professional Services: $1 M per occurrence / $2 M aggregate
- Retail: $2 M / $4 M
- Construction: $5 M+ / $10 M+
- Healthcare: $3 M+ / $6 M+ (plus separate malpractice coverage)
- Manufacturing: $5 M–$10 M / $10 M–$20 M
Beware: If you win one large verdict early in the year, your aggregate limit could be exhausted—leaving you exposed for the rest of the year.
5. How to Gauge Your True Needs
- Evaluate Your Worst-Case Scenario
- What’s the largest conceivable claim you could face?
- Include legal fees—sometimes defense costs exceed the damages sought.
- Review Contracts & Client Requirements
- Many clients demand specific minimums (e.g., $2 M/4 M).
- Falling short can cost you the job, even if you’d never actually get sued.
- Consider Your Assets & Revenue
- Higher revenues and valuable equipment/property mean more at stake.
- Stress-Test Multiple Claims
- Could you face two or three suits in one year? Does your aggregate absorb that?
6. What Happens If You Guess Wrong
- Out-of-Pocket Defense: Once limits are exhausted, you pay every dollar of legal costs.
- Settlement Shortfalls: You may be forced to negotiate lower settlements or litigate a hopeless case.
- Business Disruption: Financial strain, damaged reputation, and lost contracts can follow.
- Higher Future Premiums: Underinsurance often results in rate hikes or non-renewal.
7. Smart (Affordable) Ways to Increase Your Protection
- Raise Your Deductible
- A higher deductible lowers premium—but make sure you can afford the out-of-pocket if a claim happens.
- Add an Umbrella Policy
- Sits on top of your underlying liability limits (e.g., $1 M primary + $5 M umbrella).
- Bundle with Other Policies
- Package General Liability, Property, and Auto with one carrier for multi-policy discounts.
- Ask About Risk Management Credits
- Safety programs, training, and inspections can earn you credits.
By understanding exactly what your per-occurrence and aggregate limits cover—and where separate policies or endorsements step in—you’ll be able to choose limits that truly safeguard your business, not just check a box.
Industry Benchmarks
Professional Services: $1M/$2M
Retail: $2M/$4M
Construction: $5M+
Healthcare: $3M+ with malpractice
Manufacturing: $5M-$10M
When to Update Coverage
Update when:
- Revenue grows 25%+
- You add staff or locations
- You sign larger contracts
- Industry rules change
What Happens If You’re Underinsured
You could lose contracts, face out-of-pocket legal costs, damage your business reputation, and pay higher premiums.
Affordable Ways to Increase Coverage
- Raise deductibles
- Bundle policies
- Add umbrella coverage
- Ask about discounts
Now you understand liability limits and why underinsurance is so risky.
Schedule a custom review with Oak Insurance Group and protect your business – the right way
