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What Factors Affect the Price of Commercial Liability Insurance?

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What Factors Affect the Price of Commercial Liability Insurance?

Almost every business needs commercial liability insurance, no matter its size and industry. This type of policy can protect your company from financial ruin when a claim is made against you, for example after someone gets injured while on your premises or their property gets damaged. It also pays out if you face a lawsuit related to libel, slander, or false advertising.

Fortunately, general liability insurance doesn’t have to be extremely expensive, and small businesses can find policies from around $50 per month. The size of the business, the risk levels, the location, the deductible, and whether the firm has ever made a claim in the past can affect the cost of insurance. Today, we’ll have a closer look at each of these factors and discuss whether you should take out a policy.

What Affects the Price of Commercial Liability Insurance? 

The insurance business is highly competitive, and companies offer various prices for the same type of service. If you haven’t checked the cost of your general liability insurance policy recently, you should find out whether it has increased over the years. If so, you might be able to lower your monthly payment by calling the company or switching to a different provider.

The price of your insurance depends on various factors, including the size and risk level of your business and whether you have ever made a claim. While these factors are outside of your control, you can lower your cost by opting for a high deductible, negotiating a package deal, or paying your premiums upfront instead of monthly.

The Size of Your Business and Number of Employees

Many insurance companies determine the size of a business by the number of employees, so this is one of the most important factors affecting the price of general liability insurance. Since the risk of a mistake and a lawsuit associated with it increases the larger the business is, more employees result in higher insurance costs. Additionally, insurance companies check your annual income to determine how much they will charge you.

The more money your business has, the more there is worth protecting when you are threatened by a lawsuit. What’s more, firms with a high income usually work with a larger number of customers and are therefore more exposed to risk. Thus, businesses with a large income and many employees will pay significantly higher premiums than smaller companies.

Your Risk Levels

Not every industry is equally risky. Retail businesses or office corporations are considered low-risk because there is little chance of getting injured on their premises. As long as the owners take adequate precautions, such as putting up warning signs whenever there is a wet spot on the floor and instructing employees not to leave objects lying on the floor, there is little chance of an injury or property damage.

Other types of businesses are more at risk. For example, people visiting a construction site are much more likely to fall, slip, or otherwise injure themselves than those visiting an office. Similarly, gyms and venues offering activities with the potential of injury must pay higher premiums because it’s more likely for a problem to occur over the years.

Your Business Location  

The location of your firm and the structure of your building can affect the quotes you receive. If you operate out of a building that is located in an area prone to natural disasters, theft, or vandalism, you might have to pay more. While commercial liability insurance doesn’t directly protect you against structural damage to your property, it pays out if your customers get injured or their property gets damaged while they are using your physical location.

This is more likely to happen during a disaster or a break-in. Depending on the size of your business, insurance providers might also consider the structure and internal features of your building. To lower your premium, you could install safety features such as disaster preparation measures or theft prevention programs. Additionally, you could provide safety training to all your employees.

Previous Claims 

Every business can run into trouble, and if you’ve had to make an insurance claim, that doesn’t automatically mean you’ve done anything wrong. However, if you’ve asked your insurance company to pay out several times over the past few years, it’s likely that your monthly cost will increase because you’re considered a high-risk customer. In this case, you’ll have to pay more, whether you stay with your old company or switch to a different one.

Your Deductible

Just like health and auto insurance, general liability insurance usually has a deductible, which is the amount of money you have to pay out yourself before your insurance kicks in. The higher this deductible, the less you pay on a regular basis. Businesses that have a lot of cash available for emergencies should consider raising their deductible. On average, this saves them money, especially if the risk of a lawsuit is very low.

The Deal You Make 

Business owners who would like to lower the price of their insurance policy should get in touch with an agent to see whether there are any deals available. Insurance is a very competitive field, so many companies offer discounted rates for a certain amount of time to attract or retain customers. For example, you might be able to package several types of insurance together to create a cheaper Business Owner Policy that covers various risks.

Similarly, paying three, six, or even twelve months in advance could reduce the total cost of insurance significantly, since providers are often willing to offer discounts for upfront payment. If you can’t currently afford to pay in advance, you could set aside some money for next year and thereby lower your costs.

Who Needs Liability Insurance? 

Insurance can be expensive for a business, especially since so many different policies are needed. In addition to taking out liability insurance, you might need to protect your building, your vehicle, and your equipment. However, most businesses can’t simply skip general liability insurance because the benefits outweigh the risks. Anyone who operates out of a physical location or advertises regularly must take out a policy.

You Have a Physical Location

Shops, restaurants, offices, gyms, and leisure centers all have one thing in common: they are based on a physical location, where employees and customers interact. Therefore, there is the potential for an issue related to injuries or property damage. For example, a member of the public might slip and fall because an object was left lying around, someone spilled a liquid, or a step wasn’t marked clearly.

Lawsuits related to such incidents can often be extremely expensive. In some cases, firms have to pay out six or even seven-figure amounts. Such an event could ruin a company if they are not insured.

You Advertise 

More and more businesses choose not to operate out of a physical location. If your firm runs online, does that mean you can skip commercial liability insurance? In many cases, the answer is no. Anyone who advertises puts themselves at risk of a lawsuit.

You might inadvertently offend someone and be sued for slander, libel, or false advertising. In such a case, your general liability insurance can pay out. Therefore, anyone who advertises must take out insurance.

What Should the Policy Cover?

As discussed, liability insurance covers you when someone gets hurt or their property gets damaged while they are at your business. Additionally, you are protected when there is an issue with one of your advertisements. Depending on the policy you choose, other events are included, as well.

Businesses that manufacture and sell objects can add product liability to their insurance, which covers them when a customer experiences an issue with their product. If you rent your office or shop space, you can also get tenant liability. That way, your insurance pays your landlord if the space gets damaged while you are occupying it.

How Can You Find the Best Policy? 

With so many options out there, it can be hard to find a suitable policy on your own. For many businesses, contacting an independent agency is the best way forward. Your insurance specialist can analyze your company’s needs and then compile the best quotes available to you. They can also discuss what kind of coverage you need, so you don’t end up paying for extras that don’t serve you well.

Commercial liability insurance is essential for most companies because it protects them against expensive lawsuits that could ruin the firm’s financial stability. When a lawsuit is brought against you because someone got injured at your business or their property was damaged, your policy will pay the legal fees and compensation. Contrary to popular belief, liability insurance doesn’t have to be expensive, especially if you’ve never made a claim in the past.

The cost depends on your business’s individual history, the risk levels associated with your industry, your physical location, your deductible, and the size of your company. If you’re confused by the various policies available to you, you should speak to an expert, who can help you find the most suitable solution. Get in touch with us now at ISU Armac to request quotes or to find out more about general liability insurance.