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General Liability Coverage Limits Explained
What the $1M / $2M number on your declarations page actually means — occurrence limits, aggregate limits, per-project aggregates, and when to go higher than the standard $1M/$2M every GC asks for.
- ✓Occurrence vs. aggregate — the two numbers every contractor must understand
- ✓Why $1M/$2M is the floor — and when GCs require $2M/$4M or $5M
- ✓The per-project aggregate endorsement and why it’s worth the upcharge
- ✓How umbrella policies bolt on extra limits cheaply
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Occurrence Limit vs. Aggregate Limit — Why You See Two Numbers
Open any contractor declarations page and you’ll see a line that reads something like “$1,000,000 each occurrence / $2,000,000 general aggregate.” Most contractors glance at it, decide they’re “fully covered,” and never look again. They’re missing the most important fact about their policy. Learn more about general liability insurance for contractors or scroll down for the details on this question.
The occurrence limit is the maximum the carrier will pay for any single claim or event. If a single accident produces a $3M lawsuit and your occurrence limit is $1M, the carrier pays $1M and you’re personally on the hook for the remaining $2M. The aggregate limit is the maximum the carrier will pay across ALL claims during the policy year. If you have a string of small claims that add up to $2M, you’ve exhausted your aggregate and the next claim — even one that’s well under $1M — gets denied. Your policy is “burned.”
For most contractors, occurrence is the limit that actually matters. A single bodily injury claim with surgery, lost wages, and pain and suffering can hit $750,000–$1.5M routinely. A construction-defect claim with multiple plaintiffs can dwarf that. Carriers know this — which is why nearly every GC, property manager, and commercial client now insists on at least $1M occurrence as the entry-level requirement.
The standard ratio is occurrence × 2 = aggregate. $1M occurrence / $2M aggregate. $2M occurrence / $4M aggregate. Some carriers will write $1M/$3M for higher-frequency trades, but the 1:2 ratio is the norm. Always confirm both numbers; never assume.
Bottom line: “Fully insured” doesn’t exist. Every policy has a ceiling. Knowing yours — and matching it to your actual exposure — is the single most important policy decision a contractor makes.
The Limits Inside Your Limits
Products-Completed Operations Aggregate
Separate from your general aggregate. This sub-limit governs claims arising from work you’ve already completed. For most contractors it matches the general aggregate ($2M when general is $2M), but some carriers will write a lower products-completed number to limit their long-tail exposure. Always confirm both numbers are equal — especially if you do work that could produce delayed claims (decks, roofs, electrical, plumbing).
Personal and Advertising Injury Limit
Usually equal to your occurrence limit ($1M typical). Covers slander, libel, copyright issues, and certain wrongful eviction claims. Lower stakes for most contractors, but verify it didn’t get carved out by a restrictive endorsement.
Damage to Premises Rented to You
A sub-limit (usually $100,000 or $300,000) for fire damage you cause to property you rent or temporarily occupy. If you rent a shop or storage unit and a soldering iron starts a fire, this sub-limit responds — not your full occurrence limit. Many contractors are underinsured here; check the dollar amount.
Medical Payments
Tiny sub-limit ($5,000 or $10,000) that pays minor medical bills without lawsuit. Useful for de-escalating small incidents before they become claims.
Per-Project Aggregate Endorsement
A critical endorsement for contractors juggling multiple jobs. Normally, a single bad project that produces $2M in claims exhausts your entire aggregate for the year. The per-project aggregate endorsement gives every project its own fresh aggregate — so one bad job doesn’t strip protection from your other active sites. Carriers charge 5–15% extra for this. For most multi-job contractors, it’s the single best money you can spend.
Limit Requirements by Customer Type
| Customer Type | Typical Required Limits | Umbrella? |
|---|---|---|
| Residential homeowner (small jobs) | $300K / $600K – $1M / $2M | No |
| Residential GC (custom homes) | $1M / $2M | Optional |
| Light commercial GC | $1M / $2M | Often required |
| Mid-sized commercial GC | $2M / $4M | $1M–$2M umbrella |
| Large commercial / institutional | $2M / $4M | $5M+ umbrella |
| Municipal / public work | $2M / $4M | $5M umbrella typical |
| Property management (national) | $1M / $2M – $2M / $4M | Often required |
| Hospital / healthcare | $2M / $4M | $5M–$10M umbrella |
Requirements vary by contract. Always read the actual insurance schedule — never assume “standard.”
When to Go Higher Than $1M/$2M
Your Contracts Require It
The simplest reason. Commercial GCs and institutional owners increasingly require $2M/$4M as a baseline. Public work often requires $5M+ via umbrella. You don’t get the job without meeting the schedule.
You Work in High-Severity Trades
Roofing, structural framing, demolition, excavation, and any trade involving height work or heavy equipment carry tail-risk catastrophic claims. A single fall-from-height bodily injury can exceed $2M alone. Higher limits aren’t optional — they’re survival math.
You Have Significant Personal Assets
If you’re a sole proprietor or LLC owner with meaningful equity in a home, retirement accounts, or other assets, an uninsured excess judgment threatens all of it. The cost of a $2M umbrella sitting on top of $1M GL is usually $400–$900 a year — a rounding error against the assets it protects.
You Run Multiple Jobs Simultaneously
Aggregate burn becomes a real risk. Either raise your aggregate (to $4M+) or add the per-project aggregate endorsement so each project has its own pool.
You’re Adding High-Profile Additional Insureds
National property managers, REITs, big-box retailers, and large municipalities almost always require $2M/$4M minimums plus $1–5M umbrella, regardless of project size. Read the AI schedule before you bid.
Why Contractors Trust Trade Safe
20+ Years
Two decades exclusively in contractor insurance, including high-limit and umbrella placements.
Independent Agency
Dozens of A-rated carriers — including specialty umbrella markets.
Fast COI Turnaround
Same-day certificates with the exact limits your GC requires.
Hard-to-Place Risks
High-limit programs for roofing, demo, and other high-severity trades.
Frequently Asked Questions
Is $1M/$2M enough?
For low-risk trades doing small residential work, yes. For commercial work or anything involving height, structural, or heavy equipment, $1M/$2M is the floor — you’ll want an umbrella on top.
What’s the difference between an umbrella and excess liability?
Umbrella sits on top of multiple underlying policies (GL, auto, employer’s liability) and can sometimes drop down to fill coverage gaps. Excess liability sits strictly on top of one specified policy — usually GL — and follows that policy’s terms exactly. Umbrellas are more flexible; excess is cheaper.
What does the per-project aggregate endorsement cost?
Usually 5–15% surcharge to your base GL premium. For multi-job contractors, it’s almost always worth it — a single bad project can’t burn your entire policy year.
How much does a $1M umbrella cost?
$400–$900 a year for most small-to-mid contractors with clean records. $1,200–$2,500 for higher-risk trades. Stupidly cheap relative to the protection it provides.
If my limits are exhausted mid-policy, can I buy more?
No. Once aggregate is burned, the policy stops responding. You can buy a reinstatement endorsement at some carriers, but it’s expensive and not always available. Better to start with limits high enough to absorb worst-case scenarios.
Are defense costs inside or outside my limits?
On standard ISO forms, defense costs are paid in ADDITION to your limits — they don’t erode the policy. On some specialty or surplus market forms, defense is INSIDE the limits and reduces what’s available for settlement. Always verify on the declarations page.
Should I have different limits for different jobs?
No — your underlying limits apply to all work. But you can buy a project-specific excess policy (sometimes called “wrap-up” coverage) when one job needs significantly higher limits than the rest of your book.
Can I lower my limits to save money?
Technically yes, but rarely smart. The savings from dropping $1M/$2M to $500K/$1M are minimal (maybe 10–15%) and most commercial customers won’t accept it. Skip this; raise your deductible instead.
Get Limits That Actually Match Your Exposure
Trade Safe builds your GL stack the right way — base limits, per-project aggregate, umbrella — sized to your actual contracts, not a generic template.