Cost of General Liability

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Benefits of General Liability Insurance

General Liability Insurance is a must-have for business in many industries. Accidents involving your business, employees, or customers can happen at any time, and at any place. With the right policy, you’ll be protected if they do. General Liability Insurance covers claims brought against your business by a third party, and can help cover expenses like medical costs, legal fees, and damages your business is found legally responsible for.

How Much Does General Liability Insurance Cost?

The cost for a small business General Liability Insurance policy usually ranges from $750 to $2,000 annually or approximately $60 to $170 per month according to the Small Business Association. However, without considering a few factors that are unique to your business, such as industry and annual revenue, an average figure may be higher and in some cases lower than the actual costs you’ll face.

Factors Driving the Cost of General Liability Insurance

The industry you are in is the biggest factor insurance companies consider when determining the price of your General Liability Insurance policy. Some industries are inherently more risky than others. For example, a large store or restaurant located in the busy downtown area of a big city is at much greater risk for third party injury claims than a freelance writer who works from home. In a brick-and-mortar business, many clients are visiting your facilities, and the chance of something like a slip and fall occurring and resulting in a personal injury claim are much greater. Similarly, companies that are manufacturing and selling physical products that could cause damages, like toys for small children or electrical appliances, have a greater exposure than a business selling a professional service such as advertising. Companies that do work involving their customers’ (or another third party’s) property, like grounds maintenance or event production, are also considered high-risk.

Industries that pay some of the highest rates for General Liability Insurance policies include cleaning services, construction, manufacturing, retail and wholesale. Businesses that offer less tangible professional and consulting services, like marketing, design, management consulting, accounting, web development, advertising, and insurance will likely pay significantly less for this type of policy. In fact, some insurers offer discounts for home-based businesses since they are by nature less risky.

Other factors that affect the cost of General Liability Insurance include which state your business is located in, the size of your business (including both revenue and number of employees), and the coverage limits and deductibles of the policy you select. Companies that employ good risk management programs may also be rewarded with discounts by some insurers.

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How Coverage Limits Affect the Cost of General Liability Insurance

Most small businesses opt for General Liability policy coverage limits of $1 or $2 million. That means that the insurer will pay up to $1 or $2 million to cover any single claim that occurs while the policy is in place. However, it’s up to the business to determine the level of coverage they need. Some businesses that recognize they have less exposure to risk can opt for limits of only a few hundred thousand dollars, while companies that face exposure to potential claims more often might play it safe with a policy worth several million dollars.

Higher coverage limits are, naturally, more expensive than lower limits. It’s important for businesses to carefully evaluate the risks they face when selecting a policy so they pay a reasonable amount without exposing themselves unnecessarily to the possibility of having to pay a very expensive and potentially bankrupting claim out of pocket. According to the National Federation of Independent Business, small businesses in the United States pay over $35 billion each year out of pocket for lawsuits - you don’t want to be one of them.