General liability insurance is one of the essential products to protect your business financially. It shields your company against possible accidents, claims, and other liabilities that may disrupt your operations. However, the big question remains: how much does general liability insurance cost?
Let’s look at the factors that determine the amount you will pay for this insurance.
1 Intended business usage
2 Occupation type or the nature of your work
3 Employees in your workforce
4 Number of employees, at maximum
5 Location and industry type
6 Extent of coverage
7 Limits and vice limits
8 Deductible vs. no deductible; higher deductibles are associated with lower premiums
9 Deductible amount
10 Higher deductibles cause lower premiums.
Average General Liability Insurance Price
Small businesses typically pay between $40 and $55 per month for general liability insurance. That generally amounts to between $480 and $660 per year. These are just estimates, however. Your actual premium price might be higher or lower based on a number of variables.
What Determines the Cost of General Liability Insurance?
One of the many factors that can affect your general liability coverage for your business is this. Let’s break down its main points below:
1. Industry Risks
Different businesses will hold different degrees of risks. For example, an office-based business is such as that of an IT consultancy. In this case, there are fewer steps to the business and hence pays a lower premium.
However, a retail store with a stream of customers visiting the premises by the day attracts higher premiums because an accident or injury is more likely to occur there. Other businesses, such as construction and landscaping, attract steeper premiums because these businesses pose higher risks of causing damage to property.
2. Business Size
Company size is another factor. Generally, a business with more employees incurs higher risk. For instance, an automobile taxi service having 20 drivers is more prone to accidents compared to a small operation with only five drivers. The premium increases with the number of employees.
3. Coverage Limits
Of the most important figures that determine the amount for your policy are the per-occurrence limit, and the aggregate limit.
Per-occurrence limit: This is the maximum limit your insurer will pay on a given claim.
Aggregate limit: The total amount that your insurer will pay out in a given year.
Typically the per-occurrence limit is at $1 million, and the aggregate limit is at $2 million. Higher limits, obviously, mean that the premiums will be even higher.
4. Claims History
Businesses that have experience with claims or lawsuits usually enjoy a correspondingly higher premium. Claim companies tend to view businesses with past claims as bigger risks, and of course, they will charge for this perceived level of risk.
5. Business Location
Where your business is also matters. If the place where you operate has a higher rate of crime or accidents, the premium will be more than if the business operates in a less unsafe area.
6. Deductible Amount
That deductible is what you pay out-of-pocket before insurance takes over. The more you pay for your deductible, the less you are going to pay in premiums, but this also means that you would have to personally bear more financial burden when you need to file a claim.
How Do Insurers Determine General Liability Insurance Costs?
Rating bureaus develop rating systems to establish how much you should pay. Some of the major organizations which develop such systems are:
Insurance Services Office (ISO)
National Council on Compensation Insurance (NCCI)
North American Industry Classification System (NAICS)
Standard Industrial Classification (SIC)
The organizations use class codes to define risks associated with industries. A business applies the classification of the risk and then pays its premium based on that classification.
How to Save on General Liability Insurance?
Although general liability insurance is an excellent risk management tool, it doesn’t have to be budget-busting. Here are a few ways you might cut back on your premiums:
Bundle your policies: A Business Owner’s Policy is one of the best ways that many small businesses can save by buying general liability insurance, but bundled in with other kinds of coverage, such as property and business interruption.
Pay annually: Instead of paying quarterly premiums, pay all the premiums at once for a year and you save on interests and financing costs.
Risk management: Keeping your claims record spotless by ensuring that you take fewer risks in your business, from keeping your floors dry to avoid slips from spilled liquids.
Is General Liability Insurance Worth It?
Even if your business is of very low risk, you will have general liability insurance all the time. Accidents that could happen to your customers who may be injured or property damage will have you pay out unnecessarily if you do not have the right coverage.
If your business has a physical location where people walk by, sell products, or operate near a client’s property, you will want to ensure that you have enough general liability coverage. This is not only a way to protect your business but also many clients and suppliers need this type of coverage before they will contract with you.
Other Insurance Policies You May Need
Not the only general coverage business needs, general liability insurance encompasses more than just general liability. Depending on the line of business and the operations, you may need extra policies, which include:
Workers’ Compensation Insurance: This insurance replaces lost income and provides medical care for employees who get injured working for the company.
Commercial Auto Insurance: This is mandatory if your business has company-owned vehicles, specifically covering third-party injuries and property damage.
Professional Liability Insurance: Also referred to as errors and omissions (E&O) insurance, it protects businesses against negligence or errors of professional service mistakes.
Cyber Insurance: Any business handling sensitive customer information is likely to need cyber insurance since this type of insurance covers losses from data breaches and cyberattacks.
What Does General Liability Insurance Cover?
In general, general liability insurance covers damages and injuries because of the operations of your business, including properties and bodily injuries. This would therefore be injuries that happen on your premises or damage caused by a product sold. It will also cover lawsuits, which may likely result from being sued.
Sometimes, your policy may reach as far as intellectual property claims, including copyright infringement and reputational harm, such as slander and libel.
Is Business Insurance a Startup Cost?
Yes. Essentially, business insurance is viewed as a startup cost, as you should have insurance in place when your business first begins to generate revenue. It protects you against the claims and liabilities that may crop up.
Final Thoughts:
How Much Coverage Is Enough?
Of course, the question of how much general liability insurance you will need is purely a matter of ascertaining one’s general liability coverage needs based on their net worth, but always best suited to get a quote from your insurance provider that will work for your unique business needs.
True enough, such protection is invaluable in the long run, despite insurance costs. Be it a small startup or a well-established company, such general liability insurance is definitely one of the greatest investments you can make in terms of protecting your business’s future. Click For More