Limited Liability insurance vs. General Liability insurance

Both offer similar coverage, but serve different purposes. Learn the difference.

Harry Lew
By Harry Lew
Published Aug 29, 2023
4 min read
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limited liability insurance

It’s easy to confuse limited liability insurance and general liability insurance. Both cover the same types of losses, including third-party litigation and property damage that could inflict a financial knockout. In addition, the beneficiaries of the insurance protection are different, and they activate at different times.

Read on to compare these insurance coverages. Jump ahead to learn:

Limited Liability insurance vs. General Liability insurance: What’s the difference?

The key difference between limited liability and general liability is that limited liability insurance protects a business owner’s personal assets (including their business interest), and general liability insurance protects the business.

The difference between Limited Liability insurance and General Liability insurance

Covers non-employee bodily injury, property damage on the job, advertising injury and injury from your productCovers non-employee bodily injury, property damage on the job, advertising injury and injury from your product
Owner buys the policyBusiness buys the policy
Protects the personal assets of the owner after the corporation’s assets have been exhaustedProtects business assets
Supplemental insurance protection for a business ownerEssential business insurance protection

What is Limited Liability insurance?

Limited liability insurance is a type of business insurance that shields an owner or partner in a corporation, limited liability company (LLC) or a limited liability partnership against the financial aftermath of litigation. It falls into the general category of business liability insurance.

Normally, legal structures insulate an owner’s personal liability for the debts of the business (though the owner of a company is still liable for their acts and omissions). Limited liability insurance kicks in at that point to fund a legal defense and, if needed, help pay for court-imposed financial settlements or judgments.

What does Limited Liability insurance cover?

Limited liability insurance activates when your personal assets outside the business come under attack in a legal dispute.

It covers losses from non-employees who:

  • Get hurt at your place of business.
  • Have their property damaged while you’re on the job.
  • Suffer a non-physical personal or advertising injury.
  • Get hurt while using your product.

Other small business insurance, including general liability, take the lead to protect against such claims. But if your general liability policy doesn’t cover the full claim amount, and a plaintiff targets your personal assets, limited liability insurance can ride to the rescue.

How much does Limited Liability insurance cost?

A limited liability insurance policy cost can vary. The price scales based on the size of the corporation or LLC, the nature of its business, its annual revenue and its number of employees.

Who needs Limited Liability insurance?

An LLC member or manager should consider limited liability insurance to protect their personal property.

In addition, any company in a risky industry such as construction should consider limited liability. An elevated risk profile can increase the odds that someone might sue and expose a business partner to legal jeopardy.

If a small business doesn’t properly preserve its corporate status (by failing to file reports, hold meetings, etc.), a plaintiff might be able to attack your personal assets.

Limited liability insurance can be backup coverage in case a small business’ general liability or other insurance policies don’t fully cover a claim, or in case the usual firewalls between business and personal assets break down.

What is General Liability insurance?

General liability insurance is small business insurance that protects small business owners against third-party bodily injury, property damage and non-physical injuries such as reputational harm and advertising injury.

It’s often the first insurance policy small business owners buy because it shields them against many common, everyday business risks.

What does General Liability insurance cover?

General liability insurance can help protect your business from:

  • Slip-and-fall injuries. A non-employee trips at your business, breaks their leg and files a lawsuit.
  • Property damage. You accidentally damage a client or customer’s property.
  • Legal fees and defense costs. You need an attorney to defend your business in a lawsuit after a claim.
  • Medical payments. Someone (excluding employees) gets injured and asks you to pay for medical expenses.
  • Reputational harm. An employee bad-mouths a client online and the client sues you.
  • Advertising injury. You’re sued for improper image use in your advertising.

If any of these incidents occur, a general liability insurance policy can help pay for an attorney, legal defense and financial settlements or judgments.

How much does General Liability insurance cost?

General liability insurance costs start at $11 per month or $128 annually. Your actual premium will depend on factors like your business location and operational risks.**

At NEXT, half of our customers pay $25 to $45 per month for their general liability insurance.**

Calculate the premium for a business like yours in your location.

Who needs General Liability insurance?

Any small business can benefit from general liability insurance — especially those who are open to the public or whose operations are more risky. Even home-based businesses with few physical risks (think programmer or copywriter) might need general liability insurance if they’re active on social media or publish internet content.

Do I need both Limited Liability and General Liability insurance?

You and/or your business might want to carry both coverages if you:

  • Run a business with a higher risk of physical injury (such as construction).
  • Operate a business that engages with the public in a high-traffic area (such as a restaurant or retail shop).

In these scenarios, both types of liability insurance can help protect your business and your personal property.

How NEXT helps small business owners

NEXT creates customized, affordable insurance packages for small business owners.

In addition to general liability insurance, we also offer:

Buy online, manage your policy via web or app 24/7, and get immediate access to your certificate of Insurance.

Get a free instant quote with NEXT.

Harry Lew
About the author
Harry J. Lew is a writer and editor with a passion for simplifying insurance for small business owners. He has over 30 years of experience writing for numerous insurance companies, publishers and professional associations. He was a content manager for Gallagher, a global insurance broker. Harry's writing has also appeared in Insurance Forums, Producer's Web, Financial Planning, Consumer's Digest and National Underwriter.

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Business insurance is divided into different policies. We offer seven types so it's easy to design the coverage that fits your business.
General Liability insurance
General Liability
Protect yourself from accidents that cause physical injury or damaged property.
Professional Liability or Error and Omissions Insurance
Professional Liability/E&O
Shield yourself from lawsuits that claim your work errors caused financial losses.
Workers' Compensation Insurance
Workers’ Compensation
Cover medical bills and lost wages if your employees have an accident at work.
Commercial Auto Insurance
Commercial Auto
Stay on the road with coverage for dents, tows and damage to someone else’s vehicle.
Tools & Equipment Insurance
Tools & Equipment
Upgrade your general liability coverage to protect any gear that’s stolen, damaged or lost.
Commercial Property Insurance
Commercial Property
Keep your building, inventory and equipment protected from fire or water damage.
Business Owner’s Policy Insurance
Business Owner’s Policy
Combine general liability and commercial property into one policy to protect your business.
* To the extent permitted by law, applicants are individually underwritten, not all applicants may qualify. Individual rates and savings vary and are subject to change. Discounts and savings are available where state laws and regulations allow, and may vary by state. Certain discounts apply to specific coverages only.
** The cost data presented here are based on NEXT active customers in the U.S. who purchased general liability insurance over the previous 12 months. These data should not be considered a substitute for obtaining a quote specific to your business. These data were updated in July 2022.
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Issuance of coverage is subject to underwriting. Not available in all states. Please see the policy for full terms, conditions and exclusions. Coverage examples are for illustrative purposes only. Your policy documents govern, terms and exclusions apply. Coverage is dependent on actual facts and circumstances giving rise to a claim. Next Insurance, Inc. and/or its affiliates is an insurance agency licensed to sell certain insurance products and may receive compensation from insurance companies for such sales. Policy obligations are the sole responsibility of the issuing insurance company. Refer to Legal Notices section for additional information.

Any starting prices or premiums represented before an actual customer quote are not guaranteed and are representations of existing premiums of active policies as of December 6, 2023. To the extent permitted by law, applicants are individually underwritten, not all applicants may qualify. Individual rates and savings vary and are subject to change. Discounts and savings are available where state laws and regulations allow, and may vary by state. Certain discounts apply to specific coverages only.