This article was reviewed for factual accuracy by Brian Halbert CFP
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General Liability Insurance–sometimes called commercial general liability insurance–is a type of business insurance that provides protection against legal liabilities to the company or individual that owns the property, assets, and people. Generally this is insurance for a business and not for an individual as it is a specialized type of insurance. A vast majority of possible business insurance claims are likely to fall under general liability insurance, making it one of the most important to have. In this guide we discuss the average cost of general liability insurance.
How Much Does General Liability Insurance Cost?
While general liability coverage is very broad and generic by design, that by no means creates a uniform cost for every business. A general liability insurance policy won’t be very tailored to your business, the cost still will be. With that said, the national general liability insurance cost is $53 a month ($636 annually). Alternatively, the national median cost was $46 a month ($552 annually). When the median is lower than the average it often points to very high-risk businesses with much higher premiums driving up the average.
Average General Liability Insurance Cost By Industry
The cost of your general liability insurance varies by your industry. When insurance companies agree to provide a business with general liability insurance, they’re agreeing to cover the cost of claims filed against the business. In order to ensure that they don’t end up losing money, they have to adjust the business’ premiums to reflect the risk they present to the insurer.
The kind of business is a huge factor in this process. Think about the likelihood of an accounting business getting sued for property damage or bodily injury? A construction company is far more likely to face both kinds of claims though. This will affect their premiums. Here are some annual industry median costs for reference:
- Construction: $825
- Non-Profits: $500
- Real Estate: $390
- Insurance: $350
- Photography & Videography: $275
Average Cost Of General Liability Business Insurance By State
There is no per state rate for general liability insurance. While location does affect the cost of general liability insurance rates, there are so many other factors that come into play that every business can pay drastically different amounts even within the same state. Below are stats for two different businesses in two different states along with a couple of other factors to illustrate this:
Industry: IT Consulting
Location: San Francisco, CA
Yearly Payroll: $100,000
Limit Per Claim: $500,000
Aggregate Limit: $2,000,000
Monthly Premium: $29.17
Annual Premium: $350
Industry: Business Consulting
Location: Dallas, TX
Yearly Payroll: $200,000
Limit Per Claim: $1,000,000
Aggregate Limit: $2,000,000
Monthly Premium: $29.17
Annual Premium: $350
Despite being in different industries, in different states, with different per occurrence limits, they pay the same amount for their general liability insurance. The factors involved in determining the final cost are very complex and there are many of them.
What Determines The Cost Of General Liability Insurance?
General liability insurance costs aren’t one-size-fits-all for small business owners. The price you pay comes down to a number of different factors combined to create a premium that accurately represents the risk you present to the insurer. Some of these factors include:
- Industry of Business: Some industries present a higher risk than others due to their dangerous nature, tools used, and the amount of time spent working on clients’ property.
- Employees: The risk of a claim increases exponentially with the number of employees.
- Location: The location of your business affects the cost due to factors like population density.
- Claim History: If you have a history of multiple claims in the past you’ll likely pay more.
- Deductible: The higher your deductible, the lower your premium tends to be.
- Coverage Amount: The claims amount you’re asking the insurer to cover will also affect the price of your insurance.
Who Should Have General Liability Insurance?
While general liability insurance isn’t typically a legal mandate for businesses or for small businesses, it is in the best interest of every business to have proper coverage. Not only may your coverage, or lack thereof, affect other business owners’ willingness to work with you, if someone does file a claim against you and you don’t have coverage, you could lose hundreds of thousands of dollars or even your business. The cost could be exorbitant, even if the claim doesn’t pan out, due to legal fees.
General Liability Insurance vs Professional Liability Insurance vs Product Liability Insurance
General liability and product liability are two of the most common kinds of liability coverage. General liability covers any damages that arise due to negligence on the part of the individual, company, or business. This insurance covers the legal expenses as well as the monetary losses that could result from a lawsuit waged by someone against them.
Professional liability coverage provides coverage to individuals who are employed in a professional capacity by a company. . Professional liability coverage covers these employees for any damages that occur due to their negligence. Professional liability insurance protects people who work in the field of medical practices for example.
Product liability and professional liability are the two other types of insurance that are frequently required by law. Product liability protects the company, manufacturer, or seller from any claims that arise due to the negligence of using their products. The product liability coverage allows people and companies to seek compensation from product manufacturers or sellers who fail to provide adequate warnings or instructions about the proper use of the products.
Business Liability Insurance vs Commercial Property Insurance
Another important distinction to make with general liability insurance is with property damage insurance. As we said above, general liability only covers injuries or property damage to your business patrons. Damage that happens to your place of business has its own insurance policy called commercial property insurance.
Liability Stemming From Alcohol Use
Accidents regardless if they are bodily or property related which are caused by alcohol provided by a business to a patron has its own unique policy. We know this sounds confusing, but insurers consider alcohol to be in a risk category all its own. All alcohol related claims will be covered by liquor liability insurance. If you own a restaurant, bar or any other business that serves alcohol you should look into a liquor liability policy.
Where To Find General Liability Insurance For Your Small Business
The only way to know for sure exactly what you’ll pay for general liability insurance is to get a quote from an insurance company or insurance marketplace like CoverWallet. While you could go without general liability coverage, it could be the most costly mistake you ever make.