When you need general liability insurance for your small business, keeping the cost down is a common priority. However, it’s helpful to know how much the coverage usually is, allowing you to determine if you’re getting a reasonable rate when gathering quotes. Here’s a look at how much general liability insurance costs.
Breaking Down Average Costs
When it comes to the average cost of general liability insurance, the stated averages vary. According to Insureon, the average premium is $42 per month. Hiscox puts the typical cost at $30 per month or less, while Progressive states the average rate is $65 per month for its new customers, and The Hartford lists $88 per month as the average.
Now, one reason for the variances can be the types of businesses commonly covered by an issuer. For example, if an insurance provider is more open to covering higher risks industries or includes large companies in its calculations, its average may exceed what’s seen with an insurer that doesn’t offer policies to companies with higher risk levels or that focuses on small businesses. Similarly, if an insurance provider has a higher-than-average coverage amount, that would also push its average cost up.
What Determines Premium Prices?
Premium prices are affected by a few factors. First, there’s the coverage amount. Most insurers consider coverage of $1 million per incident with an annual cumulative claim limit (referred to as the aggregate limit) of $2 million to be a basic policy. It’s the coverage level that’s most commonly used, as it’s sufficient for many small businesses. However, higher coverage amounts are available. For example, companies can request $2 million per incident with an aggregate limit of $4 million.
The deductible a small business sets also influences premium prices. Higher deductibles lead to lower monthly premiums, while low deductibles push premiums up.
Specific aspects of the business also influence pricing. Its industry impacts the amount of risk associated with insuring it, so high-risk companies have higher premiums than low-risk ones. A history of claims also leads to higher premiums, as the business is riskier to insure in the eyes of insurance providers.
Finally, the company’s location is also part of the equation. Higher crime rates, above-average costs of living, and similar factors may lead to premiums that cost more than those paid by companies in low-crime or less expensive cities or states.
Are Certain Industries More Expensive?
Specific industries are more expensive to insure than others, usually because they’re associated with higher risk. For example, operating a brick-and-mortar retail location comes with more risk than running an e-commerce store. With the former, customers come into the company’s retail space, creating risks associated with customer injuries that aren’t present with an e-commerce-only operation.
Construction- and installation-related businesses also present higher risk. These companies operate on a customer’s property, which can lead to property damage claims. The same is true of cleaning services, though the risk of significant or high-cost damage is usually lower than with construction or installation.
As a result, a company’s industry does play a major role when it comes to the cost of general liability insurance.
Can You Reduce Premiums?
There are a few steps small businesses can take to reduce their general liability insurance premiums. Bundling several insurance policies by getting all of the coverage through a single insurer can lead to discounts. Paying a full year’s premium up front may lead to savings, as could choosing a higher deductible.
Certain risk-management steps may also lead to lower rates. For example, having employees take part in comprehensive training or minimizing hazards on-site may lead to lower premiums. At a minimum, it can likely reduce the company’s number of claims, and being claims-free does lead to reduced rates.
