Understanding the Cost of General Liability Insurance Coverage

Certain types of businesses are more likely to experience claims, including shops open to the public and companies performing work at different locations. Additionally, larger businesses tend to pay higher premiums because more employees, locations, and job sites lead to more risk exposure.

Some industries are inherently riskier to operate in than others. That’s why retail, construction, healthcare, manufacturing, food service, and transportation businesses often experience more claims.

For example, a retail shop may need its general liability policy to pay medical bills for a customer who slipped in their store, and construction companies may face claims that their work caused property damage at a client’s home or place of business. Since insurance companies are more likely to make claim payments for businesses with more risk exposure, they often charge higher premiums.

Insurance premiums can vary state by state and even change based on the city you’re in. If your business operations take place in a densely populated area, you may pay more than a company in a smaller town. Additionally, if businesses in your area tend to file more claims on average, you may pay more accordingly.

Your claims history can show your insurance company whether you’re adequately managing your risks, and the lower the risk, the lower your premium. If you have a lengthy claims history that required significant payouts from your insurer, you’ll likely pay more than a similar business with fewer claims.

While some cost factors are out of your control, like location and industry, you can take steps to improve your claims history and lower your premium.

Your general liability insurance coverage limits determine how much your insurance company will pay for a single liability claim (your per-occurrence limit) and all claims throughout the policy period (your aggregate limit). The higher the limits, the more money you’ll pay for your policy — but you’ll have more protection if the unexpected happens. That’s why it’s important to assess your risks and raise your coverage if you believe you could exceed your current limits.

Your insurance agency can help you determine the proper limits to manage your company’s risks without overpaying premiums. Umbrella and excess liability policies may also provide a more affordable way to raise limits beyond what your general liability policy covers.