General liability insurance covers claims that your work injured somebody or damaged their property. A customer's floor ruined during an installation, a passer-by hurt near your van.
It is the policy most commercial customers, landlords and contracts require before letting you on site, which is why it is usually the first one a service business buys.
What it does not cover
Four things people assume it does, and each has its own policy:
Your own employees getting hurt — that is workers compensation.
Your own tools and vehicles — separate cover.
Mistakes in advice or design rather than physical damage — see professional liability.
Failing to complete work you were paid for — that is bonding.
Cost and coverage
Premiums are driven by trade, revenue, payroll and claims history. Higher-risk trades pay considerably more, and the difference between trades is larger than the difference between insurers.
Coverage is stated per occurrence and in aggregate. The aggregate is the annual ceiling across all claims, and it is the number that matters if you have a bad year.
Where it appears in your accounts
Under insurance and compliance, in operating expenses. It is a fixed cost — it does not fall when work does — so it belongs in the break-even calculation.
The certificate
Customers ask for a certificate of insurance rather than the policy. Keep the current one where you can find it in a minute, because it is usually requested when a job is about to start.