How Much General Liability Insurance Do I Need?

Understanding how much general liability insurance you need might not be as exciting as landing a new client or launching a product, but it could mean the difference between a minor setback and a major financial crisis for your small business. A single liability claim — whether from a customer injury, property damage, or advertising dispute — could potentially cost your business hundreds of thousands of dollars.

General liability insurance helps shield your company from costly claims involving bodily injury (not related to medical malpractice), property damage, and advertising injuries. But choosing the right limits of liability coverage takes time and careful consideration. You might find yourself asking, “how much general liability insurance do I need?”. Should you opt for a limit of $500,000 per occurrence? Is a $1 million annual aggregate enough? Or is a higher coverage option the right way to go, even if it increases your annual premiums?

In this article, we break down what you need to know about general liability insurance limits, how to determine the right coverage for your business, and what factors impact your insurance costs.

Types of General Liability Insurance Limits

When you buy general liability (GL) insurance, you need to choose your limits of liability, or the maximum amount your insurance company will pay for covered claims, both per claim and per year. Think of these limits like guardrails for your coverage. GL insurance comes with two liability limits:

• Per-occurrence limit. This represents the maximum amount your insurance will pay for any one claim. For example, if your policy has a $1 million per-occurrence limit, you’d be fully covered if a customer is injured on your premises and claims $800,000 in damages.
• Aggregate limit. This is the total amount your insurance will pay during your policy period — typically one year. For instance, with a $2 million aggregate limit, you’d be covered up to that amount for all claims in that year.

You’ll often see these written as “$1M/$2M,” indicating a $1 million per-occurrence limit and a $2 million aggregate limit.

Aggregate Limit vs. Per-Occurrence Limit

Aggregate limits and per-occurrence limits work together. Imagine, for example, that you face three claims in one year:

• First incident. A claim for $200,000
• Second incident. A claim for $600,000
• Third incident. A claim for $500,000

With a $1M/$2M policy:

• Each claim falls under the $1M per-occurrence limit.
• The total ($1.3M) is within your $2M aggregate.
• You’d have $1,700,000 remaining for other claims made during that policy period.

However, if the claim for the first incident was $1.2M, your per-occurrence limit would cap coverage at $1M — leaving you responsible for the extra $200,000. You would still have $1M available for future incidents within that policy period.

How Much General Liability Coverage Do I Need?

It’s important to keep in mind that legal fees, expert testimonies, judicial costs, and any monetary settlements are included in what your limits of liability pay out. So, the amount of GL coverage your business needs depends on several key factors:

• Industry risk level. Some industries face higher liability risks than others. For example, construction companies typically need higher limits than accountants, as they face greater risks of property damage or injury claims.
• Business size. This includes both revenue and physical footprint. A design firm handling million-dollar renovations or a retail chain with multiple locations needs higher limits than a solo consultant working from home.
• Client requirements. Many contracts, especially with large companies or government entities, require a high amount of coverage.
• Physical location. Businesses in busy shopping centers or downtown areas face more risk than those in quiet office parks.
• Assets to protect. The more assets your business has, the more coverage you might need. For example, interior designers who work in luxury homes or contractors who handle expensive equipment need higher limits.

Most small to medium-sized businesses start with a $1M per-occurrence policy, while some independent contractors and service professionals such as fitness instructors opt for occurrence limits of $200,000 to $500,000.

How Do Different General Liability Limits Affect Policy Costs?

As you’d probably expect, higher liability limits mean higher insurance premiums — but the relationship isn’t always dollar for dollar. Here’s how different factors influence how much general liability insurance will cost you:

• Coverage limits. Extra coverage will cost extra. It’s as simple as that. But the difference of going from $1M/$2M to $1M/$5M is likely only a few hundred dollars a year. For example, at Berxi, a $1M/$2M is typically $350 a year for most industries. But going to a $5M aggregate could be as low as $550/year.
• Industry classification. Insurance companies use classification codes to determine base rates. A home organizing business might pay $29 per month for a $200K/$500K policy, while a food truck could pay significantly more for the same limits due to higher expected risks.
• Claims history. Previous claims can affect your premium more than higher limits. A business with a history of claims might pay more for a $1M/$2M policy than a claim-free business pays for $1M/$5M coverage.
• Location. Your premium reflects local claim trends and legal climates. Some states tend to see higher jury awards and settlements, which can drive up insurance costs regardless of your limits.
• Deductible choice. General liability insurance at Berxi does not have a deductible, but at other insurance providers you may want to opt for a higher deductible to offset the cost. Just make sure you’re comfortable paying that higher deductible if you need to file a claim.

One way to save on GL insurance, regardless of your limits, is to buy directly from an insurance carrier. For example, buying directly from Berxi can save you up to an average of 15% compared to going through a broker.

Estimate Your General Liability Insurance Costs With Berxi

Berxi will rolling out comprehensive GL insurance state-by-state in 2025. It will include:

• Coverage for nonmedical bodily injury, property damage, and advertising injury claims
• Flexible payment options
• Expert claims support
• Direct-to-you savings of up to 15%
• The financial strength of Berkshire Hathaway Specialty Insurance

Whether you need a stand-alone GL policy or want to add GL insurance to your existing coverage, Berxi can help. Simply start a quote online or reach out to our product specialists to get started. And if you’re not sure about the difference between general liability and professional liability insurance, Berxi has resources to help you learn more.

General Liability Limit FAQs

Below are some of the most frequently asked questions people ask about general liability insurance. For questions that are not answered below, you can talk to a product specialist to make sure you have the right kind of insurance for your business needs.

What is the industry standard general liability limit?

Most small businesses start with a $1M/$2M policy — that’s $1M per occurrence and $2M aggregate. However, the right limits depend on your industry, size, location, and client requirements. Some businesses need higher limits in both categories, while others might be fine with lower coverage. For example, a yoga instructor teaching at studios that have their own insurance might need only $100,000 per claim and $300,000 aggregate.

How much is a $1M general liability insurance policy?

The cost of a $1M GL policy is as low as $350/year (or $29/month) at Berxi. This rate varies significantly based on your business type, location, and claims history, to name a few. A tax preparer or virtual assistant might pay on the lower end of this range, while businesses with higher foot traffic or more physical interactions, like retail stores or food service operations, might want a higher aggregate limit per-policy period (Berxi can offer up to $5M), and thus pay more.

How do I calculate my general liability rate?

Insurance companies consider several factors when calculating your rate:

• Your industry and specific business activities
• Annual revenue and number of employees
• Physical location and property details
• Claims history
• Coverage limits and deductible choices

How much liability insurance should a small business have?

At a minimum, your liability coverage should be enough to:

• Meet any client or contract requirements
• Protect your business assets
• Cover typical claim amounts in your industry
• Account for legal defense costs

Depending on the size of the small business, for example, business owners with retail space could choose a $1M per-claim policy to provide adequate protection, while businesses that don’t meet face to face with clients could opt for smaller limits. The small businesses that choose a policy with a $5M aggregate typically handle high-end clients or work in a more risk-prone industry.

Your needs might be different, and depending on your industry you may need professional liability insurance alongside your GL coverage. It’s important to take the time to learn more about the coverage and make an informed decision on what’s right for your business. Consider discussing your situation with a Berxi insurance product specialist or getting a quote online (Berxi will be releasing GL policy information and rates state by state throughout 2025).

 

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The views expressed in this article are those of the author and do not necessarily reflect those of Berxi™ or Berkshire Hathaway Specialty Insurance Company. This article (subject to change without notice) is for informational purposes only, and does not constitute professional advice. Click here to read our full disclaimer