Understanding business liability limits
Most Canadian small businesses carry $2M in commercial general liability. Whether that is enough depends less on your risk appetite than on your contracts — landlords, general contractors and enterprise clients increasingly specify $5M.
Liability limits are usually chosen once, at first purchase, and never revisited. Meanwhile the contracts a business signs keep evolving — and the limit your counterparties require is the number that actually governs.
Where the requirement really comes from
| Counterparty | Typical requirement | Where it hides |
|---|---|---|
| Commercial landlord | $2M–$5M CGL + tenants’ legal liability | Lease insurance schedule |
| General contractor | $5M CGL, additional insured, primary & non-contributory | Subcontract insurance clause |
| Enterprise / government client | $5M CGL, sometimes E&O and cyber too | Master services agreement |
| Franchisor | Per franchise agreement, often $5M | Franchise disclosure documents |
What moving from $2M to $5M actually costs
Less than most owners expect. The second layer of limit is cheaper than the first because most claims settle inside the first million — the added premium is buying tail risk, not frequency. For many service businesses the jump is a few hundred dollars a year, either as a higher CGL limit or an umbrella sitting over it.
The two clauses that cost more than the limit
“Additional insured” and “primary and non-contributory” ride along with limit requirements in most GC and enterprise contracts. Neither is automatic on Canadian wordings. Ask for both at quoting time — discovering the second one after you have signed is the common failure.
Frequently asked
Is a $5M umbrella better than a $5M CGL limit?
Do liability limits include legal defence costs?
My contract asks for “per occurrence” and “aggregate” — what is the difference?
This article is general information, not insurance advice. Insurance Genie is not an insurer, brokerage or agency. Coverage is defined by the policy wording issued by the insurer and confirmed by the licensed organization that places it.
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