The price of general liability insurance greatly depends on the unique operations of your business. On average, small, low-risk companies may pay about $42 per month for this policy, while a small high-risk business could pay $1,000 per month.
Factors that influence the cost of general liability insurance
Some of the factors that impact the cost of general liability insurance include:
- Your exposure – A company that manufactures, sells, delivers, and installs a product is more at risk of accidents than a company that only sells and delivers a product.
- Your location – The cost for your services may vary by area and state. Areas with more claims or higher payouts always pay more premium.
- The number of employees – A sole proprietor is exposed to less risk than a business with employees.
- Annual revenue-the more business you do, the likelihood of accidents increases.
- Limits needed-the higher the limit, the higher the cost.
How to manage your general liability insurance costs
There are several ways you can reduce your general liability insurance premiums. Some of these include:
Adjusting your coverage limits and deductibles
You may adjust your deductibles. It is necessary to realize that this increases our out-of-pocket cost when a claim happens. Consider your budget when considering increasing your deductible when purchasing a policy.
Implementing loss prevention and safety standards
Proper loss prevention and safety protocols can help keep your business location accident free. Prevention is key. By reducing the risk of accidents occurring to your visitors and customers, your exposure to claims decreases. For example, a painting contractor could minimize the possibility of accidents by maintaining a certain amount of space around the work area by marking off with pylons and ropes to keep by-passers a reasonable distance away. By reducing your claims, you can reduce your premiums.
Discounts are a great way to help you save when purchasing general liability insurance for the enterprise. The type and amount of discount depending on the insurance company’s offerings. Carriers may offer discounts to customers who pay the annual premium up front, agree to email delivery of policy and documents, or have existing policies with the carrier. Be sure you inquire about potential discounts at the time of your quote.
What Doesn’t General Liability Insurance Cover?
General liability insurance covers general liability claims, but this policy does not cover all business exposures. Other business insurance policies are needed to provide your company with more comprehensive coverage. The general liability policy does not cover the following:
- The employee suffers an injury or disease during their employment. You'll need workers' compensation insurance to handle that kind of claim.
- A client sues your business due to an error in your professional services. You'll need professional liability insurance for this.
- Your employee gets in an auto accident while delivering to a client in a company-owned car. A commercial auto insurance policy is needed for third-party liability.
- Your company's building is damaged as a result of a fire. Commercial property insurance only will cover this loss.
- Your company suffers a cyber-attack. The bad actor is holding company and client data ransom. You will need Cyber insurance.
How do mandatory liability insurance costs vary based on the insurance policy limits for a business?
Unless you pay more to receive comprehensive insurance coverage, your auto insurance plan will only pay for some accidents. The same applies to your business liability insurance. Your premiums will be higher if you want a policy with higher limits. General liability insurance coverage with $1 million per occurrence and $2 million aggregate limits is the most common amount carried by small companies. This includes the following:
- $1 million per-occurrence limit - During the policy's term, the company will reimburse up to $1 million per claim.
- $2 million aggregate limit - An insurer will typically pay up to $2 million for claims, two claims at $1 million each during the policy term
Coverage customized for your business operations will determine your needed coverage limits. You'll need coverage that sufficiently covers your company’s potential to hurt someone or damage someone’s property with your work.
How Is a General Liability Insurance Premium Calculated?
It depends. Businesses can be rated on exposures of annual revenue, annual payroll, square footage occupied, number of units (think hotel rooms), or another basis. To oversimplify, the carrier applies its rate for the industry times your exposures to determine a premium. Other factors that influence insurance costs include the limit of liability your business is buying and your business’s past liability claims, including the frequency and severity of the claims. As your policy renews yearly and your business remains loss free, those good experience credits add up.