How Much General Liability Insurance Do I Need?

Short answer: most Texas businesses land on $1 million per occurrence with a $2 million general aggregate, because that is what contracts and leases ask for. That is a starting point set by other people's paperwork, not by your actual exposure. The right limit is the higher of what your contracts require, what your license requires, and what a bad day in your line of work realistically costs.

The question "how much general liability insurance do I need" gets answered badly in two directions. Some owners buy the minimum a client demanded and stop thinking. Others buy a number that sounds serious without checking whether the aggregate, the exclusions, or the additional insured wording actually satisfy the contracts they already signed. Both end up paying for a policy that does not do the job.

This guide covers the four things that should set your limit, how the aggregate quietly limits you, where Texas law puts a floor under specific trades, why the second million costs so much less than the first, and what to check before you assume your certificate satisfies a contract. If you want someone to read your actual contract exhibits, start with a general liability quote.

Four inputs, in priority order

1. What your contracts and leases require. This is the binding constraint and it is not negotiable after signing. Commercial leases, general contractor subcontracts, vendor agreements, and municipal permits routinely specify a per occurrence limit, a general aggregate, a separate products and completed operations aggregate, and often additional insured status with primary and non-contributory wording plus a waiver of subrogation. Every one of those is a separate requirement, and satisfying the dollar limit while missing the endorsements still puts you in breach.

2. What your license requires. A statutory floor for certain trades, covered below.

3. What a realistic worst case costs in your line of work. The number nobody calculates.

4. What your balance sheet can absorb above the limit. Because everything above the limit comes out of the business, and in some structures out of the owner.

Note the ordering. Contract requirements set the minimum. Exposure sets the target. If exposure exceeds the contract requirement, the contract requirement is not your answer.

The limits structure, explained properly

A general liability declarations page carries several numbers, and owners tend to read only the first one.

Each occurrence limit. The most the policy will pay for any one covered occurrence. This is the number in "one million dollar policy."

General aggregate. The most the policy will pay for all covered claims during the policy term, excluding products and completed operations. Commonly twice the occurrence limit. This is the number that quietly matters. A business with $1 million per occurrence and a $2 million aggregate that has a bad year does not have three million dollars of protection. It has two.

Products and completed operations aggregate. A separate bucket for claims arising after your work is finished or your product has left your hands. For contractors this is often the most important limit on the page, because construction defect and completed operations claims surface years after the job.

Personal and advertising injury limit. Covers libel, slander, wrongful eviction, and advertising injury. Usually equal to the occurrence limit.

Damage to premises rented to you. Fire legal liability. Frequently $100,000 by default. If your lease makes you responsible for damage to the leased premises, and the standard limit is $100,000 on a space that costs far more than that to rebuild, that default is a real gap.

Medical expense limit. Small, typically $5,000 or $10,000, paid without regard to fault. Genuinely useful for defusing minor incidents before they become claims.

Whether defense costs are inside or outside the limit. On most standard occurrence forms defense is outside the limit, meaning legal costs do not erode your coverage. On some surplus lines and specialty forms, defense is inside. On a claim that costs $250,000 to defend and $400,000 to settle, that distinction is the entire difference between adequate and inadequate.

Where the aggregate bites: per project versus per policy

For contractors this is the single most overlooked structural question.

A standard general aggregate is shared across everything you do during the policy year. A contractor running six jobs simultaneously has one aggregate covering all six. If a defect claim on Job 1 consumes most of it in March, Jobs 2 through 6 spend the rest of the year with an eroded limit, and the certificates you already issued to those clients no longer reflect reality.

A per project aggregate endorsement gives each job its own aggregate. Many general contractor subcontracts require it explicitly. Many contractors carry a certificate that says $2,000,000 general aggregate and have no idea whether it is shared or per project. Check the endorsement schedule, not the certificate.

Where Texas law sets a floor

Texas does not license general contractors at the state level, so for most trades there is no state mandated liability minimum. Several licensed trades are exceptions.

Under 16 Texas Administrative Code Section 73.40, electrical contractors, electrical sign contractors, and residential appliance installation contractors must maintain general liability coverage of at least $300,000 per occurrence combined for property damage and bodily injury, at least $600,000 aggregate, and at least $300,000 aggregate for products and completed operations. The rule also requires that the coverage come from an admitted carrier, an eligible surplus lines carrier under Insurance Code Chapter 981, or a company rated B+ or better by A.M. Best.

Air conditioning and refrigeration contractors fall under 16 Texas Administrative Code Section 75.40, which sets limits by license class. Class A licensees must carry at least $300,000 per occurrence, $600,000 aggregate, and $300,000 products and completed operations aggregate. Class B licensees must carry at least $100,000 per occurrence, $200,000 aggregate, and $100,000 products and completed operations aggregate.

Two things follow. These are licensing floors, not a recommendation about adequate limits, and many commercial contracts ask for more. And the requirement is continuous, so a lapse is a licensing problem stacked on top of a coverage problem.

Municipalities add their own layer. Many Texas cities require proof of general liability at specified limits to pull permits or to hold a right of way or solicitation permit, and those minimums vary by city and by permit type. Check the specific city, not a general rule.

What your exposure actually looks like

Here is the arithmetic many owners never see. A general liability claim with serious bodily injury can involve medical costs, lost wages, noneconomic damages, and defense costs. Depending on the facts, a serious injury on your premises or caused by your work can exceed a $1 million limit.

Texas exemplary damages can sit on top of that in qualifying cases. Under Civil Practice and Remedies Code Chapter 41, exemplary damages require proof by clear and convincing evidence of fraud, malice, or gross negligence, and are generally capped by a statutory formula. Whether a policy can respond depends on its terms, the facts, and applicable law, so substantial exposures deserve both legal and insurance review.

Practical way to think about your own number. Ask what the largest single loss your operation could plausibly cause looks like. A landscaping crew that drops a tree limb through a windshield on a busy road. A restaurant with a norovirus incident. A roofer whose fall protection fails on a subcontractor's employee. A property manager with a stairwell that gives way. Then ask whether $1 million covers the medical, the wage loss, the noneconomic damages, and the defense on that scenario. For a lot of Texas trades it does not, and the honest answer is that the standard million everyone asks for is a contract convention rather than an actuarial conclusion.

The efficient answer: primary plus umbrella

Here is the part that makes higher limits affordable. General liability pricing is heavily weighted toward the first layer, because that is where the frequency is. Most claims never approach the policy limit, so the first million absorbs nearly all of the expected loss cost. The second million absorbs only the rare claims that pierce the first, which are much less common.

The consequence is that a commercial umbrella sitting above your general liability, commercial auto, and employers liability typically costs a small fraction of the primary premium per dollar of coverage. Going from $1 million to $3 million is almost always cheaper through an umbrella than by raising the primary limit.

The breakdown of what a million dollar limit actually buys walks through why the pricing curve works this way.

Two cautions on umbrellas. The umbrella requires specified underlying limits, and if your primary limits drop below what the umbrella schedule requires, you have a gap exactly where you thought you had a tower. And an umbrella follows form only to the extent stated. It will not cover something the primary excludes unless it is written to, so an exclusion on the primary usually travels upward.

Limits are only half the question

A limit that satisfies a contract on paper can still fail to satisfy the contract. The endorsements matter as much as the numbers.

Additional insured status. Contracts routinely require the client, the general contractor, the landlord, or the property owner to be named as an additional insured on your policy. There are many additional insured forms and they are not interchangeable. Some cover ongoing operations only and not completed operations. Some cover only to the extent required by written contract. Read the form number.

Primary and non-contributory. Means your policy pays first and does not seek contribution from the other party's policy. It is commonly required and generally depends on policy or endorsement language.

Waiver of subrogation. Gives up your carrier's right to recover from the other party after paying a claim. Also required routinely, also requires an endorsement.

Texas limits how far this can go. Under Texas Insurance Code Section 151.102, a provision in a construction contract that requires an indemnitor to indemnify, hold harmless, or defend a party against a claim caused by the negligence or fault of the indemnitee is void and unenforceable as against public policy. Section 151.104 extends that voiding to additional insured provisions to the same extent. Section 151.103 carves out an important exception: the rule does not apply to a provision requiring indemnity against a claim for bodily injury or death of an employee of the indemnitor, its agent, or its subcontractor of any tier.

That last exception is why action over coverage matters so much in Texas. An injured employee of your subcontractor can sue you, and the anti-indemnity statute expressly permits contracts to push that back down. If your policy carries an action over exclusion, the coverage you most need for that scenario is not there. Check for it.

Occurrence versus claims made. Occurrence responds to injury or damage happening during the policy period regardless of when the claim is filed. Claims made responds only if the claim is reported while coverage is in force, which creates gaps when you switch carriers and creates tail costs when you exit. Most construction contracts specify occurrence form explicitly.

TDI's certificate of insurance guidance is worth internalizing here: a certificate is evidence of coverage, not a contract, and it does not amend or extend the policy. The certificate saying you have additional insured status does not create additional insured status. The endorsement does. See the additional insured versus certificate holder explainer for the difference that costs contractors the most money.

A practical way to set your number

Work through this in order:

• Pull every signed contract, lease, and subcontract and list the insurance requirements exhibit from each. Take the highest per occurrence limit, the highest aggregate, and the highest products and completed operations aggregate that appear.
• Add any license minimum that applies to your trade.
• Add any municipal permit requirement in the cities where you work.
• Separately, write out the worst plausible single loss your operation could cause, and price the medical, wage, and noneconomic components honestly.
• If that number exceeds your contract requirements, buy to the exposure and use an umbrella to get there efficiently.
• Confirm the aggregate is per project if you run multiple simultaneous jobs.
• Confirm defense is outside the limit.
• Confirm you can produce the additional insured, primary and non-contributory, and waiver of subrogation endorsements your contracts require.
• Raise the damage to premises rented to you limit if your lease makes you responsible for the space.

That sequence produces a defensible number rather than a copied one.

Questions worth asking before you buy

• What is my general aggregate, and is it shared across all jobs or per project?
• Is products and completed operations a separate aggregate, and how large?
• Are defense costs inside or outside my limit?
• Is this an occurrence form or claims made?
• Does my policy have an action over exclusion?
• Which additional insured form number is on my policy, and does it include completed operations?
• Do I have primary and non-contributory and waiver of subrogation endorsements, or just a certificate that says so?
• What would an umbrella cost, and what underlying limits does it require?
• What is my damage to premises rented to you limit, and is it adequate for my lease?

Frequently asked questions

Is $1 million in general liability enough for a Texas business?

One million dollars per occurrence with a two million dollar aggregate is a common contractual starting point, not a universal recommendation. Whether it is adequate depends on the business operations, public and product exposure, contract requirements, assets, and the potential cost of a serious claim.

Does Texas law require general liability insurance?

There is no general statewide requirement for businesses to carry general liability, and Texas does not issue a statewide general contractor license. Specific licensed trades do have minimums. Under 16 Texas Administrative Code Section 73.40, electrical contractors, electrical sign contractors, and residential appliance installation contractors must carry at least $300,000 per occurrence, $600,000 aggregate, and $300,000 products and completed operations aggregate.

What is the difference between the per occurrence limit and the aggregate?

The per occurrence limit is the most the policy pays for any single claim. The general aggregate is the most it pays for all claims combined during the policy term. A business with a $1 million per occurrence and $2 million aggregate that suffers three separate $1 million claims in one year will exhaust the aggregate before the third is resolved.

Should I raise my limit or buy an umbrella?

Either structure can be appropriate. An umbrella can add limits over scheduled underlying policies, while some contracts require the primary policy itself to carry a stated limit. Compare the umbrella's underlying requirements, exclusions, coverage scope, and total cost with a licensed agent before choosing.

Can a contract require me to name a client as an additional insured for their own negligence?

Not in Texas construction contracts. Under Texas Insurance Code Section 151.102, a provision requiring indemnity for a claim caused by the indemnitee's own negligence or fault is void and unenforceable, and Section 151.104 extends that to additional insured provisions. Section 151.103 carves out claims for bodily injury or death of the indemnitor's own employees.

Do higher limits actually make me a bigger lawsuit target?

A liability limit does not determine whether the business is legally responsible for an injury or damage. Limits should be selected from the business's contracts, operations, assets, and plausible claim severity, with legal and insurance advice when the exposure is substantial.

Where Argo fits

Argo Insurance is an independent agency, which means we can put the same submission in front of several carriers and compare not just the price but the form. On general liability that matters, because the difference between two quotes at the same limit is usually an endorsement schedule rather than a rate.

Send us your signed contracts and leases, or at minimum the insurance requirements exhibits, along with a description of your operations, revenue, subcontractor use, and three to five years of loss runs. We will tell you what limit your paperwork actually obligates you to carry, where your current policy falls short of it, and whether an umbrella gets you to the right number more efficiently than raising the primary. Start with a general liability quote or a contractor general liability quote.

Coverage descriptions here are general. Rates, eligibility, limits, exclusions, and endorsements vary by carrier and by risk, and the policy issued controls. This is not legal advice, and contract requirements should be reviewed by your attorney.