General liability insurance is crucial coverage for small businesses to have in place. It protects your company in the event of property damage, bodily injuries, personal injuries and advertising injuries that happen because of your operations or products.
But how much does general liability insurance cost for a small business? Typical general liability insurance rates for small businesses generally range from $500 to $3,000 annually, with costs varying based on factors like your industry classification, location, years in business, revenue, number of employees and claims history.
While costs can add up quickly, general liability coverage often pays for itself if you ever need to file a claim. Having this protection in place safeguards your business assets and keeps your company running if you’re faced with a lawsuit or major damage costs.
Throughout this comprehensive guide we cover factors impacting your general liability premiums, typical costs for different industries, tips for securing affordable coverage, common exclusions to understand before buying a policy and answers to frequently asked questions.
What Impacts General Liability Rates for Small Businesses?
Several factors impact how much your general liability insurance will cost from one provider to the next. Key rating criteria impacting premiums include:
Industry: Your industry classification and claims risks within that sector significantly sway annual costs and available coverage limits. Higher liability risks drive up premiums.
Location: Insurance rates are graduated by state, but also by metro area for some carriers. Areas with greater risks of injuries, lawsuits and catastrophic damage have higher base insurance rates.
Years in Business: New businesses typically pay higher premiums until establishing a multi-year history. More tenured companies have lower general liability costs.
Revenue and Number of Employees: Higher gross annual revenue and more full time employees equals greater general liability insurance expenses. Minimum premium charges often apply until reaching certain payroll thresholds too.
Claims History: Past general liability claims will lead to notably higher renewal premiums, as it indicates higher ongoing risks. Too many claims can also get policies dropped.
Now that we’ve covered the key general liability rating factors, here is an overview of typical costs based on small business industry and other common traits.
Typical General Liability Rates by Industry and Risk Profile
General liability insurance rates have a wide range based on business type and other attributes. Here’s an overview of typical annual premium charges small businesses face:
| Industry | Typical Yearly Premium Range |
|---|---|
| Professional Services (marketing, HR, consulting) | $500 – $2,000 |
| Retail Store | $1,500 – $5,000 |
| Restaurant | $2,500 – $7,500 |
| Contractors | $7,500 – $20,000+ |
| Manufacturers | $5,000 – $25,000 |
| Technology Startup Companies | $750 – $5,000 |
As shown above, typical general liability insurance costs vary significantly based on your sector and risks. Professional services and tech startups have minimal chances of bodily injuries, letting them access basic policies for $1,000 or less in yearly premiums. Main Street retailers land in the middle around $2,500 per year.
On the upper end, contractors, restaurants and manufacturers take on far greater liability risks with customers, guests and operating equipment. Typical charges for business owners in these sectors range from $5,000 to $25,000+ annually. Although costs are steeper, claims payouts also raise significantly higher for severe property damage and bodily/personal injuries too.
Beyond your core business type, other common general liability rating factors include:
- Location: Premiums run higher in lawsuit-heavy states like New York and Louisiana. Annual costs similarly sway based on metro area litigation and incidents risks.
- Years in Business: An unproven business track record leads higher premium quotes until establishing longevity. Costs ease after successfully renewing over 2+ years.
- Revenue: Minimum charges often apply until surpassing at least $500k in yearly sales. Costs raise moderately with each major gross revenue tier crossed.
- Employees: Payroll size directly impacts premium costs. Going from 0 to 1 FTE raises rates, with further gradual increases alongside each 5+ full-time team members.
- Claims History: Even one past liability claim can make premiums spike 20% to 50% higher upon renewal. Too many incidents make securing ongoing coverage difficult.
Now that you understand some of the most influential general liability rating factors for small businesses, here are tips to lock down affordable coverage.
8 Tips for Lowering Your General Liability Insurance Costs
Business insurance rates can appear inconsistent and confusing from one agency to another. But there are many ways you can minimize costs for the exact same coverage.
Follow these proven tips to keep your general liability premiums in check:
1. Compare Quotes Across Multiple Insurers
Like most insurance products, general liability rates, coverage limits and exclusions can fluctuate notably across companies.
Before renewing an existing policy, get fresh quotes from 5+ competing insurance agencies to see where annual costs truly land in the current market climate for your situation. You may spot 20-40% savings over your current insurer.
Online insurance marketplaces like CoverWallet and Next Insurance make getting quick comparisons from top-rated carriers simple and convenient.
2. Ask About Bundling Opportunities
Does your company also need some combination of property insurance, commercial auto, workers compensation, cyber insurance or other common policies?
Ask every insurer about potential discounts from packaging multiple coverages together with one provider. Typical bundling discounts range from 5% to 15% off standard rates. That adds up big over time.
3. Review and Tweak Your Industry Classification Code
Insurers slot client companies across thousands of standardized industry classification codes as a starting point for risk analysis. But codes can sometimes misalign with a business’ actual day-to-day operations and dangers.
Review your assigned class code and discuss tweaks with agents to shift into a closer industry and rate grouping. Even subtle classification shifts could cut yearly premiums 5-15% without losing necessary protection.
4. Raise Your Liability Claim Deductible
The majority of small business owners pick low $500 or $1,000 claim deductibles to keep rare out-of-pocket incident costs minimal…but doing so raises premium charges sharply over the long run.
Ask carriers to quote rates at higher $2,500, $5,000 or even $10,000 liability claim deductibles. Going up incrementally in this range cuts premium costs substantially while still blocking the worst case scenarios without breaking your bank.
5. Implement Risk Reduction Initiatives
General liability carriers closely evaluate what actions client companies actively take to minimize risks and dangers. By launching formal loss control programs and staff safety protocols, you show dedication to limiting the chances of costly claims happening down the line.
Be ready to share risk reduction details during insurance quote discussions. Touting these initiatives often helps secure more affordable premium offers. Ongoing participation may also open doors to longevity discounts over time too.
6. Take Advantage of Chamber of Commerce Insurance Partnerships
Does your small business actively participate in a regional chamber of commerce, trade association or local business leadership council?
Many of these groups negotiate special pricing discounts and eased coverage qualifications with partner insurance carriers. Check available options for further savings off typical market rates.
7. Request Credits for New Safety Measures
Speaking of risk reduction…did you recently invest money into major equipment upgrades, revised safety protocols or new loss prevention systems for your business location?
Discuss these big moves with insurance agents and carriers when shopping rates. New safety measures help qualify your company for premium credits that recognize the reduced future claim probability.
8. Pay Premiums Upfront for Big Savings
Like other insurance lines, most general liability carriers incentivize policyholders to pay full 12-month premium costs upfront rather than going month-to-month. Discounts for annual pre-payment often reach 10%+ over standard charges.
Paying the full bill early saves your cash flow some modest interest charges as well. Just take care to work with reputable insurers with proven financial strength to avoid any payment issues.
Sticking to that same proactive approach, be sure you fully understand common exclusions inherent to typical general liability policies too…
Notable General Liability Insurance Exclusions to Know
On the surface, a general liability policy may seem to cover all imaginable incidents tied to your business location or operations. But coverage does face some important exclusions.
Common exclusions not covered by a general liability insurance policy include:
- Intentional property damage or bodily harm
- Gradual environmental incidents
- Worker jobsite injuries (covered separately by workers comp insurance)
- Product defects or damages
- Use of automobiles
- Breach of professional advice or services
- Infringement of intellectual property (IP)
These are the most frequent “gotchas” found across general liability insurance plans. Be sure to discuss the specifics with your preferred insurance representative to head off unpleasant surprises later.
For further savings opportunities as you lock down this necessary coverage, check out these additional ideas too:
- Ask About Premium Financing: Breaking up your yearly premium bill into more affordable monthly payments often opens doors to 0% financing offers from partners of insurance carriers. Just like a zero interest installment loan.
- Inquire on Longevity Discounts: Many insurers provide a 5%+ loyalty discount upon renewing for 3-5+ consecutive years claims free.
- Keep Growing Your Business: As you legitimately scale up revenue, locations and other metrics over time, improved size and credibility often yields better insurance rates upon renewal too.
- Maintain Spotless Claims Records: Avoiding incidents remains the #1 way to lock in lasting affordable insurance costs across all major lines of business coverage.
To wrap up this comprehensive general liability insurance guide…here are answers to a few frequently asked questions:
Frequently Asked Questions (FAQ)
How much liability insurance do small businesses need?
Typical starting recommendations range from $1 million to $2 million in general liability aggregate coverage. Higher revenue companies or those in risky sectors may require $3 million to $5 million though. Discuss ideal limits with multiple insurance agents based on your unique situation.
Can I buy general liability insurance monthly?
Yes, most insurers allow breaking down your full yearly premium into 12 monthly installments. This avoids large upfront payment shocks…but does sometimes come with extra financing fees or interest charges around 3% to 10% over prepaying the full annual premium upfront.
What does Claims Made vs Occurrence mean?
General liability plans come in two structures – Claims Made and Occurrence forms. Occurrence policies cover incidents that arise during the active policy term whenever claims get filed later on. Claims Made plans generally only apply toward claim incidents that arise AND get officially filed while coverage is active. Occurrence plans provide longer tails of protection if your business closes later after alleged incidents take place years back. But they cost 20% to 40% more in premiums for that added comfort.
Can I get general liability insurance with no down payment?
Yes, you can often split premium bills evenly over 6 or 12 monthly installments. This effectively results in no down payment with the first bill. Just be cautious of higher financing fees sometimes associated with going this route. Pre-paying the full annual premium at once saves the most over time.
How long does it take to get general liability insurance?
The entire application and policy activation process typically completes within 5 to 10 business days on average working with a independent agent. But getting protected ASAP can finish in as little as 24 to 48 hours in a rush. Marketplace websites like CoverWallet enable starting coverage instantly in under 60 seconds in some cases too.
Hopefully this detailed overview better prepares you to find affordable general liability insurance for your small business. Follow the tips provided to keep costs minimized while still securing adequate protection should the worst incidents strike down the road. Compare rates proactively each renewal period to ensure you always lock in the best possible premiums among top-rated insurers year after year.