How Much Does Liability Insurance Cost?
The average cost for a General Liability Insurance
(GL) policy for a small business is between $500 and $600 annually.2
Your exact cost depends on your own business’s risk exposure. GL helps cover the costs of some of the most common liability claims that can be made against your business. It helps protect you from the costs of third-party bodily injury, third-party property damage and advertising damage liability claims.
It’s important to note that General Liability Insurance typically does not cover damage claims related to the professional services you provide. Professional Liability Insurance
is the coverage you want to help protect your business from claims that errors or omissions were committed in the delivery of your services.
Understanding General Liability Insurance Cost
There are several cost factors that determine how much you will pay for General Liability Insurance. Among the most important are:
Condition of the building your business is in
Industry type/type of work
General Liability Insurance Costs by Industry
One of the biggest cost factors driving General Liability Insurance
premiums is your business’s industry. Businesses that are in riskier industries tend to cost more to insure. For example, a landscaping business that specializes in tree removal probably has a higher industry risk than a graphic design firm. You can imagine the equipment and danger involved in moving trees and the potential for costly damage claims are higher than that of a graphic designer. So it follows that a landscaping business should expect to pay more than a design firm for their General Liability Insurance.
There are other risks that can be factored into determining industry risk. For example, if your business has a show room that lots of customers walk through, you may see higher premiums. This is because General Liability Insurance helps cover the cost of third-party personal injury claims made against your business. So, imagine a customer slips and falls in your showroom, General Liability Insurance is designed to help cover the cost of that type of claim. Your business will probably pay more for General Liability Insurance if there’s a higher likelihood of a third-party making a personal injury claim against it.
Typical annual average premium rates for certain industries:3
Hair Salon/Barber Shop: $450 annually
Small Retail Store: $875 annually
Computer Repair Service: $375 annually
It’s interesting to note that retail stores, on average pay higher premiums than hair salons or satellite dish repair companies. This is because retail stores tend to see heavy foot traffic. More customers moving in and out of a store translates into a higher probability of injury claims being made against the business.
General Liability Insurance Cost Examples
Industry type isn’t the only factor that plays a part in determining General Liability Insurance cost. The location of your business can also affect your premium rates. And it’s not just your geographical location that matters. The physical property where your business resides is also an important determinant.
Businesses located in heavily populated areas typically pay more for premiums. This is because these businesses are likely to experience heavier foot traffic. Heavier foot traffic increases the likelihood of customer bodily injury claims. Additionally, it can mean more third party businesses and third party personal property surrounding the insured business, which in turn, increases the odds of a third-party property damage claim.
For example, a repair service located in a sparsely populated rural area is typically less likely to damage someone else’s property. However, a repair service in a metropolitan area has an increased risk that they’ll damage someone else’s property due to its proximity to others’ property. This is based simply on the fact that there is more business and personal property surrounding the insureds’ location.
The age and safety rating of the building that your business is in also factors into General Liability Insurance premium costs. If your business is located in an older building with outdated safety features, you might pay more for General Liability Insurance coverage than a business located in a new structure. This is because businesses in older buildings with outdated safety features are more likely to experience accidents.
For example, a marketing vendor is visiting a graphic design studio. The graphic design studio is located on the top floor of an old mill. The marketing vendor leans against a door in the graphic design studio. Because the door is old, it gives way under the weight of the marketer, who falls into the next room and injures his arm.
How to Reduce the Cost of a General Liability Policy
There are a number of ways that you can help reduce the cost of your General Liability Insurance policy. For starters, you can bundle your General Liability Insurance policy into a Business Owner’s Policy
(BOP). A BOP combines General Liability, Commercial Property
and Business Income Insurance
into one convenient policy. Not only are you likely to save money by combining them, you’ll streamline your payment process. Instead of paying for three policies separately, you’ll have one policy premium to pay.
Also, you can usually save money by paying your annual insurance cost upfront in one lump sum. Typically, insurers offer discounts for premiums paid in full at the beginning of the policy period. However for some, monthly payments maybe more convenient, especially for businesses that are just starting out.
You can also actively manage the risks that your business faces. Instituting robust safety protocols at your business and employee training can help lower your risk and may help lower your General Liability Insurance premiums. Risk management services can help you with safety planning and training.
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to learn how business insurance from The Hartford can help you protect your business.