How Much CGL Coverage Does Your Business Need?

Commercial General Liability (CGL) insurance protects your business from third-party injury, property damage, and legal claims. But how much coverage is enough?

The default answer — $1 million — is common in many policies, but it is not always sufficient. Your ideal coverage limit depends on several factors, including where you work, who your clients are, how much exposure your business faces, and what your contracts require.

Choosing the right limit means finding the balance between adequate protection and manageable premiums. Underestimating your risk could leave you paying out of pocket in a lawsuit. Over-insuring might stretch your budget without delivering meaningful extra value.

What Does a CGL Coverage Limit Mean?

Your coverage limit is the maximum amount your insurer will pay for a claim. Most policies specify two key limits:

Per occurrence limit: The most the insurer will pay for a single claim or incident
Aggregate limit: The most the insurer will pay in total during the policy year

For example, a policy with a $1 million per occurrence limit and a $2 million aggregate limit would cover two separate $1 million claims but would not cover a third claim if the total amount exceeded $2 million.

Note: These limits include legal defense costs, which can consume a large portion of the benefit if a lawsuit is involved.

How to Estimate the Right Amount for Your Business

There is no one-size-fits-all number. The right amount of CGL coverage depends on the nature of your work, the size of your contracts, and how much risk your business carries in daily operations.

You may want higher limits if:

You operate in a space open to the public
Your work involves physical interaction with clients or property
You work on large projects or long-term contracts
You are in an industry where injury or property claims are more common
Your clients, landlords, or vendors require higher limits in writing

Factor	Recommended Limit	Why It Matters
Home-based consultant	$1 million	Low exposure, minimal foot traffic
Small retail shop	$2 million	Regular customer visits, potential injury claims
Contractor working on-site	$2 to $5 million	Higher risk of property damage or bodily injury
Trade show vendor	$2 million	Public interaction and venue requirements
Business with government contracts	$5 million or higher	Often required by contract terms

Caution: If your contract or lease requires $2 million and you only carry $1 million, your insurance may not satisfy your obligations. This can delay your work, void agreements, or expose you to liability gaps.

Other Considerations Beyond Limits

Your CGL coverage is only as effective as your policy details. When reviewing your limits, also consider:

Your deductible: The amount you must pay before coverage kicks in
Coverage territory: Does it apply across provinces or countries where you do business?
Endorsements: Add-ons for unique risks like product liability or tenants’ legal liability
Claims history: A pattern of prior incidents might justify a higher limit

Tip: If you’re unsure, start with $2 million in coverage. It is often the minimum required for landlords, vendors, and event organizers and provides broader protection than a $1 million limit without a major cost increase.

The Right Coverage Protects More Than Your Assets