Coverage Limits Explained
What Is a $1 Million General Liability Policy?
A $1M policy means $1,000,000 per occurrence and (typically) $2,000,000 aggregate — the most a carrier will pay for a single incident and the most they’ll pay total during the policy year.
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How $1M/$2M Limits Actually Work
When a contractor says, “I have a $1 million policy,” they almost always mean a $1M per occurrence / $2M aggregate general liability policy. This is the industry-standard minimum and what most residential GCs, property managers, and small commercial clients require on every COI. Learn more about general liability insurance for contractors or scroll down for the details on this question.
Per occurrence is the maximum the carrier will pay for any single claim or incident. If a plumber floods a basement and the loss is $1.4 million, the policy pays $1 million and the contractor (or their umbrella) covers the remaining $400,000.
Aggregate is the total cap the policy will pay in one year. With $2M aggregate, you could have two separate $1M losses in the same policy year and still be fully covered. A third loss in the same year — with no aggregate remaining — would come out of pocket or out of your umbrella.
A standard $1M/$2M policy typically also includes additional sub-limits worth knowing about:
- Products / completed operations aggregate — usually $2M, mirrors the main aggregate.
- Personal & advertising injury — usually $1M.
- Damage to premises rented to you — usually $100,000 or $300,000.
- Medical payments — usually $5,000 or $10,000 per person.
For larger commercial jobs — hospitals, schools, government buildings, hotels — the GC will often require $2M/$4M or higher. The most efficient way to hit those higher numbers is layering a $1M to $10M commercial umbrella on top of your underlying $1M/$2M policy. Adding a $1M umbrella typically costs $400–$900/year — far cheaper than raising the underlying GL.
Bottom Line
A $1M/$2M policy is the contractor industry standard. It satisfies almost every residential GC and small commercial requirement. For bigger jobs, layer an umbrella on top rather than raising the underlying limits.
When $1M Isn’t Enough — And When It’s Too Much
$1M/$2M is the right answer for the vast majority of residential and light-commercial contractors. But there are two situations where it falls short, and one where it’s overkill.
Too low for: any contractor regularly working on hospitals, schools, government buildings, hotels, or multi-family construction. These GCs routinely require $2M/$4M plus a $5M umbrella. They will not even accept your bid with $1M/$2M alone on the COI.
Too low for: contractors whose single-job exposure exceeds the policy limit. A roofer doing a $1.5M commercial reroof needs more than $1M of per-occurrence coverage because the project itself is bigger than the policy ceiling.
Probably too much for: a true one-person handyman billing under $40,000 a year doing strictly small interior repairs. Some carriers offer $300,000 or $500,000 limits that satisfy state minimums at meaningfully lower premium. Trade Safe will quote both options and let you decide.
Per-Project Aggregate — The Endorsement Most Contractors Miss
By default, your $2M aggregate is a single shared pool across all your jobs. One big claim can eat the entire pool and leave every other project unprotected until renewal.
A per-project aggregate endorsement resets your $2M for each project — effectively multiplying your protection at minimal extra premium. Most commercial GCs require this endorsement, and Trade Safe attaches it automatically whenever the carrier allows.
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