How Much is General Liability Insurance for a Small Business?

How Much is General Liability Insurance for a Small Business?

One of the most important things to do when starting a business is to purchase Liability Insurance. 

 

One question that a business owner often has is “How much does it cost?”

 

The potential damage that can be caused to both the physical property of others and/or the bodily injury to others is what will determine how much you will pay for Liability Insurance. So it really comes down to the type of business that you are operating.

 

For Example, a flower shop is going to pay less for Liability Insurance than a contractor building houses.

 

Most businesses in the service and retail sectors have their insurance premiums based off of their gross sales. 

 

An insurance company will create a rate which includes all of the potential that the insurance company has to pay out on a claim and how much each claim will cost. 

 

They will then multiply that rate by the amount of gross sales that each insured business has and that will determine the premium. So the more sales that your business has, the more potential you have for a claim (exposure); therefore, the more your premium will increase.

 

Gross Sales × Rate = Premium


 

Some industries, such as construction, will use Payroll Figures in the place of Gross Sales.

 

Most insurance companies have Minimum Premiums so that if the formula returns a premium less than that Minimum, they will add a surcharge until it reaches the Minimum Premium.

 

So if my premium is returned as $250 by the formula and the Minimum Premium for the Insurance Company is $500, they will surcharge me an additional $250 to get the premium up to the $500.

 

$500 is a common Minimum Premium for most Insurance Companies. 

 

Starting a business can be very risky. Investing in insurance is a great way to protect your assets and your dreams.

 

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