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What Goes into the Price of a General Liability Insurance Policy for Small Businesses?

12. March 2014 08:35

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Creating a small business insurance policy is a delicate balancing act. Your provider has to assess how much risk they are taking on by covering your business. And to make an accurate evaluation, they need to know more about your company, its operations, and where its potential vulnerabilities may lie.

Each of these factors influences the cost of your General Liability Insurance premium. Take a look at what these considerations tell your provider about your business and why they affect the price of your GL policy.

General Liability Price Factor 1: Size and Condition of Your Business Premises

One of the primary functions of a General Liability policy is to protect your business from the cost of premises liability claims. So it makes sense that the price of your coverage would be influenced by the size and physical condition of your office building or commercial location.

For example, larger premises mean more places where slip-and-fall injuries can happen (if your property is open to the public), which can raise your rates. As for the condition of your property, insurers examine the age of the construction and whether the building is up to code. Generally, "newer" construction lowers your liability rates, whereas older construction with a lack of accessibility can raise GL rates.

General Liability Price Factor 2: Type of Business Operations / Industry

When it comes to risks, not all businesses are created equal. For instance, construction businesses are usually considered "high risk," whereas consultants are typically categorized as "low risk." But even within these industries, each profession has its own spectrum of hazards and vulnerabilities. Typically, the higher your industry's risk profile, the higher your premium estimates will be.

General Liability Price Factor 3: Experience in Your Profession, Field, or Business

Don't be surprised if your insurance application asks about your years of business experience and your company officers' professional expertise. Your business's longevity and financial stability can lower your premiums.

General Liability Price Factor 4: Number of Employees

The more employees you have, the more chances that they could accidentally damage someone else's property (which is a liability that GL covers). Say, for example, an employee spills coffee on a client's laptop. That client could sue your company for replacement or repair costs.

That's why your premium will typically be higher if you have more employees. Your application will typically request a breakdown of full- and part-time employees, as well as the number of subcontractors or consultants you employ so your provider can asses your risks accurately.

General Liability Price Factor 5: Location of Your Business

Your geographic location can affect your rates, too. For instance, urban areas may increase the likelihood of violent crime against customers on your premises. So if your business is in the city, you may pay more for General Liability coverage. However, since the crime rates in suburban areas are lower, businesses located in these areas may have lower liability rates. High traffic areas can also mean higher premiums because more people through your doors means more chances for possible injuries.

General Liability Price Factor 6: Limits and Deductibles

The higher your coverage limits, the more your policy will cost. (You can keep your General Liability limits reasonable and draw on extra coverage when you need it by purchasing an Umbrella Liability Insurance policy.) As for your deductible (i.e., the amount you pay before your insurance benefits kick in), remember that higher out-of-pocket spending will lower your monthly premium.

General Liability Price Factor 7: Policy Features

Some insurance providers offer products designed specifically for businesses in your industry. These products can save you money because they cut out the frills and extra coverages that your profession doesn't use. But if your policy does have additional features, such as Product Liability Insurance, your quote will usually reflect those additions. (Related post: What Is Product Liability Insurance?)

General Liability Price Factor 8: Claims History

A previous claim doesn't necessarily mean your General Liability premium will be higher, but there is a good chance it will influence your quote in some capacity. Ultimately, your provider and the nature of the loss will determine the extent of the impact. Many carriers evaluate claim histories on a case-by-case basis.

For more information on the cost of General Liability Insurance, check out our General Liability Insurance Cost Analysis.

Get General Liability Insurance Quotes for Free

Most of the influences on your General Liability Insurance quote are outside your realm of control. However, it's good to keep these components in mind so that you know when to update your plan to reflect changes in your business.

If you don't already have a General Liability policy, let the experts at insureon help you find the coverage that fits your needs. We're happy to offer industry-tailored products from top-rated insurance providers. See how much you can save when you apply for free General Liability quotes today.

This post is part of an ongoing series about saving money on business insurance. Stay tuned to learn more about how to cut your coverage costs and still keep your business adequately insured!

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Business Owner's Policy | General Liability Insurance | How to Grow Your Business | Insurance Savings Tips | Product Liability | Tips for All Small Businesses

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