What Is Comprehensive Liability Insurance?

by Fraser Sherman ; Updated October 25, 2018
Comprehensive liability insurance is the most widely used business insurance product.

You won't find 21st century insurers offering you comprehensive liability or comprehensive general liability insurance. It's an outdated term, though not an outdated concept because the old CGL meaning is the same as the meaning of general liability insurance today. Under either name, it protects your company if you're found liable for injuring someone else or damaging his property.

Tips

  • Comprehensive liability is an old term for what's now called general liability insurance. It protects you and your business if you're sued for slander or libel or if you injure someone or damage someone's property.

Commercial General Liability Coverage

Under any name, commercial general liability coverage, or CGL, protects you if you have to cover damages to outside parties. If, say, a customer or visitor slips and falls on the stairs in your office, you're liable the same way a homeowner is. CGL covers the medical payments and pays legal costs if the injured party wants to sue. If the injured party dropped and broke her cell phone in the fall, that's covered too. Some policies also kick in if your employees cause damage on the client's premises.

Product liability is a major component of CGL. Suppose a toy you make breaks into sharp pieces, or your organic omelet gives a customer food poisoning. Whenever your product or service causes someone injury or property damage, CGL can cover the attorney fees and damages if the case goes to court. Personal injury and advertising injury coverage protect you if someone thinks you've slandered them or that the advertising for your company is fraudulent. If you use independent contractors to handle some of your workload, CGL coverage protects you if they cause the same sort of damages.

What CGL Doesn't Cover

The name change from comprehensive general liability to just general liability served to make the name more accurate. Neither the old CGL nor the new is truly comprehensive because they don't cover everything. Changing the name keeps customers from assuming that they do.

For example, if a salesperson crashes the company car into another vehicle, CGL isn't interested: You need commercial auto insurance for that situation. CGL covers damage and injuries caused by your products or services, but it doesn't pay for financial damage from missed deadlines or failure to deliver. For that you need professional liability insurance. Lawsuits from your own employees and damage to your company property fall outside CGL coverage too. Your insurance company will provide you with a CGL coverage form that spells out what's covered and what's exempt in exhaustive detail.

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Do You Need CGL?

Usually, you're better off carrying general liability insurance than not. That doesn't mean you have to buy it separately. A standard business owner's policy combines general liability with property protection so you get them both. If you do buy CGL that way, however, the liability limit may be lower than you need. Check the policy and see if it's sufficient for your needs.

Some businesses don't need much. If you're a web designer working from home and communicating with clients over the internet, you're less likely to damage other parties than a kitchen remodeler working in someone's home. However, you could still find yourself on the end of a slander lawsuit for something you said about your competitors, or a client might claim that your ads aren't truthful. Geography is a factor too. Some states set limits on damages, while other states are more generous to victorious plaintiffs. Your insurance agent can help you figure out the right level of coverage.

Even if you don't need much now, it's smart to reassess your situation every year. If you've gone from a one-person shop to having two dozen employees driving for you, the chance of something going wrong goes up accordingly.

About the Author

Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs. His website is frasersherman.com

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