General liability insurance

What it covers

General liability is the policy for harm your business causes to other people: a customer who trips over your hose, a ladder that goes through a neighbor's window, a drain line you cut that floods a finished basement. The SBA describes it as protecting against financial loss from bodily injury, property damage, medical expenses, libel, slander, defending lawsuits, and settlement bonds or judgments ¹. When a covered claim comes in, the insurer provides a lawyer to defend it ¹, which can matter as much as the payout.

Every policy has its own limits, deductibles and exclusions, so the policy wording, not a general description, decides what's covered.

What it usually doesn't cover

• Your own workers. Injuries to your employees fall under workers' compensation insurance under your state's rules. Ask your agent to confirm in writing.
• Your tools, equipment and trucks. Those need property, inland marine or commercial auto coverage. A personal auto policy may not cover a work vehicle, so ask.
• Fixing your own bad work. If a water heater you installed leaks, many policies cover water damage to the house but not the cost of redoing your own installation. Ask how yours handles it. That cost belongs to your workmanship warranty and your prices.
• Customer property in your care. Many policies limit or exclude property you're working on or holding, such as a customer's car at a detail shop. Detailers usually need separate coverage for vehicles in their care.
• Trade-specific exclusions. Roof work, height limits, pollution (including chemical runoff), mold and hot work are common places for exclusions or limits.

Example: A pressure washing tech sprays a cleaning mix that drifts onto a neighbor's car and spots the paint, and $1,500 of detailing and paint repair is needed. If your general liability policy covers that kind of damage, you pay your deductible and the insurer handles the rest. If the policy excludes chemical damage, the $1,500 comes out of your profit. The numbers are made up for illustration; read your policy's pollution and chemical wording before the first job.

Why you need it even with an LLC

An LLC can keep a claim from reaching your personal assets, but it doesn't pay the claim. The SBA notes that general liability is a good idea even for LLCs and corporations ¹. Without it, a claim goes after everything the business owns.

It's also a door opener. General contractors, property managers, HOAs and commercial customers often ask for a certificate of insurance before you start, and some name the limits they require. Some states also require proof of liability insurance to get or keep a contractor license; check with your state licensing board. A license bond is a different thing and doesn't replace it.

Common mistakes

• Describing the work loosely. If you tell the agent "handyman" and do roofing, a claim can turn into a coverage fight. Describe every service you sell.
• Not reviewing coverage as you grow. The SBA suggests reassessing every year, since adding equipment or services changes your risk ¹.
• Assuming a sub's mistake is the sub's problem. Collect each sub's certificate of insurance before they start, and ask your agent how your policy treats subs without one. See independent contractor.
• Leaving the premium out of your prices. It's overhead, so it belongs in every job.

Questions to ask your agent

• Which of my services are covered, and which are excluded?
• What limits do the GCs and property managers I want to work for require?
• How does the policy treat property I'm working on, chemicals, water damage and work at height?
• Is the premium based on payroll or revenue, and will it be audited?