Is General Liability Based on Payroll?

General liability is an important insurance that every business, large or small, needs for protection. This insurance provides compensation for bodily injury and property damage and can even help with legal expenses if a victim decides to sue the company for either of these incidents.

Most businessowners know they need this insurance, so the next question is obvious: how much does it cost?

The cost of business insurance varies depending on many factors, not only the company’s payroll. Other factors include:

Location
Coverage limits
Industry risk
Claims history
Deductible

Coverage Limits

General liability policies typically go by millions. Most businesses choose between a $1 million policy and a $2 million policy. Higher coverage limits mean higher monthly premiums. You can choose a higher deductible in order to lower your monthly rates, but this means you will have to pay more out of pocket if an accident happens.

Industry Risk

The risk posed by your company’s industry accounts for a large part of your general liability rates. Insurance agencies consider the likelihood of your company filing an insurance claim as a factor of risk. Industries that have a history or high likelihood of injury tend to be higher risk. Examples of these industries include:

Construction
Contracting
Landscaping
Food (ex: restaurants)
Retail
Cleaning services
Healthcare

Certain industries face unique risks, such as healthcare. General liability doesn’t cover everything, so be sure to have the right amount of insurance for your industry.

Claims History

Your company’s claims history can tie into the industry’s risk. If your company has a long history of claims, your insurance may be higher as the insurance agency sees you as more likely to file another claim. Like with most insurance, filing a claim can make your rates rise. On the other hand, long-standing businesses with a lot of experience often have lower premiums.

Payroll

The rate of general liability depends partially on how large the business itself is. The more customers you serve and the more locations you have can affect your insurance rates. It will also affect how much coverage you should have. Large businesses, especially those in high risk industries, should invest in higher coverage rates for general liability insurance. Your overall gross sales may affect your premiums, too.

Cost of General Liability

On average, the cost of general liability insurance ranges between $750-$2,000 a year. There are ways to save money on general liability, however. You can bundle general liability and property insurance with a business owners policy, also known as a BOP. A BOP combines general liability with property insurance. Property insurance covers the physical structure owned by the business from fire, lightning, wind, theft, vandalism and more. This package is best for small, low-risk industries, as it’s usually affordable. For larger businesses or high-risk industries, a commercial package policy (CPP) may be the best choice. A CPP combines general liability and property insurance but is more flexible. Since it allows you to add more coverage, this package tends to be more expensive than a BOP.

You can extend your general liability with an umbrella liability policy, which steps in once your other liability policy reaches its limit. For example, if your general liability policy covers $1,000,000 and you’re sued for damages for $1,300,000, an umbrella insurance policy will help cover the remaining $300,000.

In order to lower your insurance rates, it’s important to manage your company’s risk. You can do this by having extensive training programs that teach employees about procedures and regulations, as well as what to do in case of emergency. Also be sure messes are cleaned immediately and hazards are cleared and accounted for.