If you’re working to establish yourself as a small business, it’s likely your budget is tight and you’re actively looking for areas within your work to reduce cost and streamline processes to bolster your bottom line. You want to be safe, but even if funds aren’t too tight, spending money on things you don’t actively need—like an additional insurance policy that may save you money someday down the road—can be a challenge. You may also be worried about how much small business liability insurance costs.
But the positive impact of general liability insurance on your business can be significant. Not only does it expand your pool of potential customers—in many industries, people specifically look for this protection before hiring a business—it also could protect you from serious financial loss, or even bankruptcy. Read on to learn more about general liability insurance and how much it’ll cost you up front.
Understanding general liability insurance
The specific claims that could be covered under the umbrella of general liability insurance—also known as “business liability insurance” or “commercial general liability insurance” by some providers—are diverse and depend on your specific industry. In general, however, this kind of insurance focuses on third-party bodily injury and property damage claims.
These claims could result from a malfunction in your company’s product, an unforeseen issue arising during a service, or an accident that occurred during routine business services. No matter what type of work your company does, if you interact with customers in person or online, rent or own an office or storefront, or visit clients in their homes—in others words, if your business is like most—protecting yourself and your employees by investing in a general liability policy is an important decision.
Since many client contracts specifically require businesses to have a general liability insurance policy, even if you haven’t needed it before, enrolling may open professional doors for you later on in your career. The bottom line is, accidents happen. In the event that you someday find yourself in an unforeseen legal situation, having this type of insurance can help make sure your business remains financially stable and your employees continue to get paid while you sort it out.
How much is liability insurance for a small business?
Once you understand the important financial security net general liability insurance provides, the first question that will likely come to mind is, “How much is this going to cost me?” The good news is that, for many small business owners, the monthly cost is quite low, typically in the ballpark of $40 to $50.
Of course, there are a number of factors that are considered in determining a small business’s liability insurance cost per month. Depending on where your business falls in these areas, that monthly price could be lower or higher. So, what are these factors?
- Industry: Depending on the level of risk involved in your industry, you may be more or less predisposed to incidents. For example, if you’re working as a general contractor to renovate people’s homes, you’re more likely to incur claims related to property damage than someone running a fully-remote digital marketing firm. As such, an insurance company would see you a as a greater liability and charge more for your monthly premium. According to an overview published by Insureon, the industries with the highest general liability premiums are contracting and construction, cleaning, and landscaping.
- Past claims: If you’ve had a history of legal issues in your business and have filed insurance claims to cover those costs, you’ll likely be quoted at a higher monthly rate. This is because insurance companies may see your business as a higher risk than they would with a less established legal history.
- Business size: From the perspective of an insurance agency, the larger your business and the more employees you have, the greater the opportunity for risk. As a result, larger businesses can expect to pay more for general liability insurance.
- Policy size: A majority of general liability insurance policies come with a procurance limit of $1 million and an aggregate limit of $2 million. This means your insurance provider will cover up to $1 million per claim but no more than $2 million annually. If you opt for a policy with a higher limit, you’re going to pay a higher premium.
While more factors related to your business could impact your quote, these are the key considerations that may affect a typical business.
How does liability insurance save my business money?
So, how might investing in general liability insurance save you money, and why should you actually take the plunge and enroll in a policy?
- Bodily injury: It may seem obvious that some businesses may be at risk of a bodily injury lawsuit—a construction professional bringing large tools onto someone’s property and having the resident trip over them and get hurt, for example. But bodily harm claims could also look like a prospective buyer visiting a real estate office and tripping on an upturned rug, or a customer slipping and falling while visiting a shop.
- Property damage: Any business that touches client property as part of their service could be at risk for a property damage lawsuit. That could look like a landscape artist backing their truck into a client’s car, a cleaner using the wrong product and inadvertently damaging the thing they’re trying to clean, or a dry cleaner damaging a sentimental garment.
- Reputational harm: This type of lawsuit may arise if you or your employees intentionally or inadvertently cause another company to lose business—and the more people you work with, the greater this risk becomes. An employee being interviewed by a news outlet, posting on social media, or leaving online reviews related to a competitor may be seen as an official statement from your brand, leaving you with a mountain of legal fees.
By having this type of insurance, you’re well prepared to defend yourself should any problems arise.
The process of getting small business liability insurance
In order to find the right policy for you and get your business enrolled, you’ll need to shop around and see what options are available to you. The majority of business insurers will offer insurance in two ways: individually, or as part of a package with other coverage rolled in.
While either could be the right option, depending on your specific circumstance, many business owners choose to enroll in a business owner’s policy (BOP). These packages include general liability as well as commercial property insurance, business interruption insurance, or other policies you may need. In bundling your policies, you’ll get all the coverage you need while likely saving money in the process.
To get a sense of what options are available and determine which is best for you, reach out to a few insurance agencies and request a quote. By speaking with insurance experts about your specific situation, you’ll be able to identify any considerations you’d previously overlooked and establish a complete picture of your needs and priorities. This will make it easier to evaluate the policy quotes once they come in and make an informed decision for your business.
While determining your small business’s liability insurance cost can seem like a daunting undertaking, just remember this expense will likely save you money in the long term. If you’re interested in learning more about business decisions you can make to get your company in strong financial standing, reach out to NorthOne about opening a small business banking account. Our team specializes in working with small businesses, meaning we’re your best resource in setting yourself up for financial success as you find your footing and set yourself up for growth. Visit us online to learn more.