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When you buy general liability insurance, you will be asked to pick your limits, and the most common answer is $1 million per occurrence and $2 million aggregate. That answer is common because it works for most small businesses, but it is worth understanding what those numbers actually mean before you default to them.
Per occurrence vs aggregate, in plain English
The per-occurrence limit is the most the policy will pay for a single claim. The aggregate is the most it will pay for all claims combined during the policy year. So a $1M/$2M policy pays at most $1 million on any one incident, and at most $2 million total across the year no matter how many incidents happen.
Some policies also carry a products-completed operations aggregate, which is a separate cap for claims arising from your products or finished work. Check whether your quote includes one and how it interacts with the general aggregate.
Why $1M/$2M is the default
Those limits became the small-business standard for a practical reason: most commercial leases, vendor agreements, and client contracts require exactly $1 million per occurrence and $2 million aggregate. Choosing those limits means your certificate of insurance satisfies the contract requirements you will run into every week. Choosing less means renegotiating or being rejected. Industry data puts the median premium for that standard policy around $45 per month, or about $540 a year. Our general liability cost guide breaks down what moves that number.
When $1M/$2M is not enough
Consider higher limits when your work creates outsized exposure. Contractors whose mistakes can damage an entire building, restaurants with heavy foot traffic, businesses whose products could injure many people at once, and anyone signing contracts that demand $2 million or $5 million per occurrence should look up. Certain industries, like construction and some types of manufacturing, have clients who simply will not hire vendors below $2 million per occurrence.
The other signal is revenue growth. A $300,000-a-year business and a $5-million-a-year business face very different lawsuit exposure, and underwriters know it. As revenue climbs, raising limits is usually cheap relative to the protection gained. Moving from $1M to $2M per occurrence typically adds a fraction of the base premium, not double.
The cheaper way to get higher limits: umbrella
Rather than buying a bigger primary GL policy, many businesses buy a commercial umbrella policy that sits on top of their GL, auto, and employer’s liability. An umbrella adds $1 million or more of extra protection for a relatively small premium. Published data puts the median commercial umbrella premium around $40 per month for an additional $1 million of coverage. The trade-off is that umbrellas follow the underlying policy terms, so gaps in the base policy can carry through. For the details, see our comparison of commercial umbrella vs excess liability.
What raising your deductible does
GL policies sometimes include a deductible, typically a few hundred to a few thousand dollars. A higher deductible lowers your premium but means you pay more out of pocket when a claim hits. For small claims, which are the most common GL claims, a high deductible can effectively mean self-insuring the small stuff. Pick a deductible you could actually pay tomorrow without borrowing.
How to decide your number
A practical approach: start with what your contracts require, since that is non-negotiable. Then look at your worst realistic claim. A slip-and-fall in your store might cost $50,000. A fire your crew accidentally starts in a client’s building could cost $2 million. If your realistic worst case is anywhere near your limits, raise them or add an umbrella. The premium difference between adequate and exposed is almost always smaller than the cost of one bad claim.
And remember that GL is only one piece of the stack. If you have a physical location or equipment, a business owner’s policy bundles GL with property coverage and often costs less than buying the two separately.
