How Much Liability Insurance Do You Actually Need?

The two numbers on your policy
The clause in your contract
Question 1: What does the contract require?
Question 2: What do you actually do all day?
What if a claim is bigger than your limit?
You're building something real. Protect it.
Sources
FAQs

When I bought my first general liability (GL) policy for my one-person consulting business, I was so lost. How much liability insurance do I actually need? Let me give you the answer I needed back then. How much liability insurance you carry comes down to two questions. What does the contract require (usually $1 million per occurrence and $2 million aggregate)? And what does your work expose you to?

The two numbers on your policy

Back then I had no idea what those numbers meant. I googled "aggregate vs occurrence limit" and found pages that defined each term, along with three more terms I'd never seen. Ask Google or an AI today, and you'll get something like: "the per-occurrence limit is the maximum the insurer will pay for any single covered event, while the aggregate limit represents the insurer's total obligation for all covered losses during the policy period, subject to the policy's terms, conditions, and exclusions." Accurate. Still not helpful. What finally worked was a friend explaining it as simply as possible, and here is what she said.

The occurrence limit is the most your policy pays for one incident. The aggregate limit is the most it pays in a year across all claims combined. The industry's standard GL policy form is structured around those two numbers, which is why every quote shows the pair. The most common one you'll see is $1 million per occurrence, $2 million aggregate.

Now the math. One claim costs $1 million, and the policy covers it. A second claim the same year costs another $1 million, also covered, and now your aggregate is used up. The policy stops paying. A third claim, however small, comes out of your pocket until the policy year resets.

The clause in your contract

Here's the requirement that probably sent you googling. It's the wording one city government actually uses with its vendors: commercial general liability of $1,000,000 per occurrence / $2,000,000 aggregate, with the city named as additional insured. It's dense, but you can now read most of it.

Commercial general liability (CGL) is the formal name for general liability. It pays your legal defense and damages when someone blames your business for bodily injury or property damage, up to its limits.
$1,000,000 per occurrence / $2,000,000 aggregate is the pair you just learned: the most it pays for a single incident, and the most it pays in a year.
Additional insured means your policy also protects your client if they are pulled into a claim caused from your work. It's a routine endorsement, often free.
Primary and non-contributory and waiver of subrogation are two more endorsements you might encounter: the first means your policy pays before your client's own insurance does, the second means your insurer won't go after your client's insurer to recover what it paid.

The contract will also ask for a certificate of insurance (COI), the one-page proof that your policy exists. Here's how COIs work for freelancers.

And this clause didn't come from one paranoid client. Seguin, Texas requires those exact numbers plus additional insured from its vendors. National City, California asks for the same. $1 million per occurrence and $2 million aggregate is the recurring standard, from a city, a venue, or a corporate client.

Question 1: What does the contract require?

Whatever number the contract names is your minimum limit. Can you talk them down? Rarely. The requirement usually comes from your client's insurer or a template that nobody on your project can change, so the fastest path to signing is to meet it. And since $1 million/$2 million is the standard ask, a $1 million liability insurance policy with a $2 million aggregate will likely satisfy the next contract too, not just this one.

Question 2: What do you actually do all day?

The contract sets your minimum. But how much liability insurance you actually carry should also depend on your work.

If you're a consultant like I was (laptop, calls, deliverables you send over email), the worst realistic claim against you probably isn't an injury. It's a client saying your work product cost them money, and GL doesn't cover claims about your professional work. That's professional liability territory (also called errors and omissions, or E&O). So a desk-based business might carry GL at the standard $1 million/$2 million minimum because contracts require it, and put the real thought into E&O. We've written about the difference between the two policies and who might need professional liability.

If your work takes place on other people's property (you build, install, shoot photos, cater, or run events), it's the other way around. Your worst-case scenario is a guest tripping over your light stand or a ladder going through a plate-glass window. Paying for that is what GL limits are for. On-site work might justify limits above that minimum. If one bad injury claim could plausibly run past $1 million, an umbrella policy (extra liability coverage stacked on top of your GL limits) typically adds $1 million to $5 million more.

What if a claim is bigger than your limit?

Then the difference is yours. When a judgment exceeds your occurrence limit, or the year's claims exceed your aggregate, the policy pays up to its limit and your business owes the rest. Once the aggregate is exhausted, the policy pays nothing more until it renews. A $1.4 million judgment against a $1 million occurrence limit leaves you owing $400,000.

That's why your liability insurance limits are worth ten minutes of actual thought. Once my friend walked me through it, my own decision got simple: what I thought I needed — or better, what the client required.

You're building something real. Protect it.

We built Olli so a business of one can meet a contract's insurance clause without becoming an insurance expert. Tell us what you do and what the contract requires, and we'll match you with coverage that fits: occurrence, aggregate, and additional insured. Start at olli.insure.

Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by state, class of business or the individual.

Sources

FAQs

How much liability coverage do venues usually require?

The recurring standard is $1 million per occurrence and $2 million aggregate, usually with the venue named as additional insured. Larger venues and municipal spaces sometimes ask for more, so read the contract before you buy — the exact numbers are almost always spelled out in the insurance clause.

Do I need General Liability insurance as a freelancer?

Often your clients decide for you: many contracts require general liability before you can start, which makes the $1 million/$2 million policy the price of admission for bigger work. If no contract requires it and your work never touches other people's bodies or property, you might reasonably hold off. Read your contracts first.

Do I need both E&O and General Liability — which one do I actually need?

They cover different claims. General liability pays when someone blames your business for bodily injury or property damage; errors and omissions (E&O), also called professional liability, pays when a client says your professional work cost them money. A desk-based consultant might need E&O more, on-site work makes GL the priority, and plenty of solo businesses carry both because a contract requires GL while their real exposure is professional.

Why does my client want me to add them as an additional insured?

Because if your work causes a claim and they get sued alongside you, additional insured status lets your policy defend and protect them too. It's a routine endorsement your insurer can add, often at no cost. Clients ask for it so your mistake doesn't become their legal bill.

What do I do if a client requires insurance and I don't have it?

Buy a policy that matches the contract's stated limits exactly, including any additional insured requirement. Many GL policies for a business of one can be quoted and bound online the same day, with the certificate of insurance (COI) issued right after. Then send the COI to your client and keep a copy for the next contract.