The three coverage parts
A standard commercial general liability (CGL) policy is organized into three lettered coverages.
Coverage A — Bodily injury and property damage liability. The core. Pays damages you become legally obligated to pay for third-party physical injury or damage to third-party property, plus the cost of defending you. The customer who slips on your wet floor; the pipe your crew breaks in a client's building.
Coverage B — Personal and advertising injury liability. Non-physical harms: libel, slander, malicious prosecution, wrongful eviction, copyright infringement in your advertising, and misappropriation of advertising ideas. This is the part most owners do not know they have.
Coverage C — Medical payments. Small no-fault amounts for minor injuries on your premises, paid without a liability determination. The purpose is to settle small incidents before they become claims.
Critically, defense costs are usually paid in addition to the limit on a standard CGL form — unlike most professional liability and cyber policies, where defense erodes the limit. On a legal defense that runs for years, that difference is worth more than a lower premium.
How the limits actually work
Two numbers govern every CGL policy, and they are not the same thing.
The per-occurrence limit is the most the policy pays for any single incident. The general aggregate is the most it pays in total across the entire policy period. A common structure is $1 million per occurrence with a $2 million aggregate: two full-limit claims exhaust the policy for the rest of the year, regardless of how many months remain.
There are also sublimits. The products–completed operations aggregate is a separate annual cap for claims arising from your finished work or products after you have left the site — the deck you built that collapses next year. The damage to premises rented to you limit, often $100,000, covers fire damage to space you lease. Medical payments carries its own small per-person cap.
If your aggregate is exhausted, it does not reset. This is one of the reasons contracts increasingly require a per-project aggregate endorsement, which gives each job its own aggregate limit.
The exclusions that define the market
Almost every other commercial policy exists because of a CGL exclusion. Knowing them tells you what else you need.
- Your own work and your own product. The "business risk" exclusions. If you install a roof badly, CGL does not pay to redo the roof. It may pay for the water damage to the owner's furniture below. The distinction is between damage to your work and damage caused by your work.
- Professional services. Errors in advice, design or professional judgment are excluded, which is why professional liability exists.
- Employee injury. Excluded — that is workers' compensation and employers liability.
- Auto liability. Excluded — that is commercial auto.
- Employment practices. Discrimination, harassment and wrongful termination are excluded; EPLI covers them.
- Data breach and electronic data. Largely excluded on modern forms — that is cyber liability.
- Pollution. Broadly excluded, with narrow exceptions; environmental impairment liability is a separate market.
- Liquor liability for businesses that manufacture, sell or serve alcohol, and contractual liability beyond an "insured contract."
Additional insured status, and why contracts obsess over it
When a landlord or general contractor requires you to name them as an additional insured, they are asking for your policy to defend and indemnify them for claims arising from your work. It is a substantive extension of coverage, not paperwork.
Two details matter. First, the specific endorsement form: forms differ in whether they cover ongoing operations only or completed operations too, and whether coverage is limited to the extent required by the written contract. Contracts often name the exact form number for this reason. Second, primary and non-contributory wording, which makes your policy respond first, before theirs.
A waiver of subrogation is a related request: it stops your insurer from later pursuing the other party to recover what it paid. It is commonly required in construction and enterprise service contracts.
None of these exist unless they are endorsed onto the policy. A certificate of insurance listing them without the underlying endorsements is evidence of nothing.
Buying it sensibly
- Classify your operations accurately. Misclassification is the fastest route to a denied claim and an ugly audit. Describe what you actually do, including any incidental operations.
- Start at $1 million / $2 million — the market default — and go higher through an umbrella rather than by raising the primary limit, which is usually more expensive per dollar.
- Confirm defense is outside the limit on the form you are being offered. Not every market writes it that way.
- Check the products–completed operations aggregate if you build, install or manufacture anything.
- Collect certificates from every subcontractor. Uninsured subs typically get charged back to you at audit and can expose you to claims you thought you had transferred.
- Report incidents early. Late notice is a genuine coverage defense, and the duty to report generally attaches to the occurrence, not the lawsuit.
Frequently asked questions
Sources
Every figure above is drawn from the following publications. Links open on the publisher's own site.
- U.S. Small Business Administration — Get business insurance
- NAIC — Consumer insurance information
- Insurance Information Institute — Business insurance basics