How Much General Liability Coverage Do I Need for My Business?

The amount of general liability coverage you need depends on the size and type of your business. A good rule of thumb is to have coverage equal to 1-2 times your annual revenue.

The more employees you have, the higher your liability risk. For example, if you have 10 employees, you may want to consider increasing your coverage to account for potential workplace accidents.

A business with a high-risk industry, such as construction or manufacturing, may require more coverage than a business with a lower-risk industry, like a consulting firm. Consider your industry's average annual losses and adjust your coverage accordingly.

Typically, a small business with $500,000 in annual revenue might need around $250,000 to $500,000 in general liability coverage.

Curious to learn more? Check out: What Does in General Mean?

Your commercial lease might require you to have a certificate of insurance, specifically business liability insurance, to protect against customer injuries and property damage.

Some liability insurance policies provide benefits to every type of business, while others cover liabilities specific to businesses with employees, offer professional services or advice, or have other risk factors.

You'll need to determine the amount of coverage you'll need, and if you're purchasing liability insurance because a lease or contract requires it, your landlord or client will likely specify how much coverage you need.

Some states require businesses to obtain some level of insurance coverage with legally mandated minimums, while others have no requirements. You can check your state insurance commissioners' website to see the specific requirements for your state.

Here are some common types of commercial insurance:

Client contracts often require a minimum coverage limit of $1 million for errors and omissions insurance.

Your commercial lease might require you to have a certificate of insurance, which shows you have financial protection to cover expenses related to customer injuries at your leased space.

If you plan to lease commercial space, property owners may ask to see your certificate of insurance, so it's essential to have it on hand.

Here's an interesting read: What Does Commercial Liability Insurance Cover

Business liability insurance is often required because it demonstrates that you can cover expenses related to customer injuries, such as if a client trips and falls or you accidentally damage a customer's expensive property.

Check with your insurance agent to ensure you have the required level of insurance coverage, as state and county requirements can vary.

As you grow your business, it's essential to consider how employee numbers impact your general liability insurance premiums. The number of employees a business has is a crucial rating factor in determining premiums.

A higher number of employees increases the potential for general liability claims, which can lead to higher premiums. This is because more employees mean more interactions with customers and clients, increasing the risk of accidents or mistakes.

The more work and services a company provides, the greater the likelihood of a loss occurring. This is directly correlated with the number of employees, so as your business expands, your premiums may increase accordingly.

A company with a larger workforce is more likely to experience a general liability claim, which can result in higher premiums. This is why it's essential to consider your employee numbers when choosing coverage limits and deductibles.

A different take: Employee Benefit Liability Coverage

Protection is a top priority for any business. Every business needs some type of business insurance to protect it.

There are two common categories of business insurance: Property Insurance and Liability Insurance. Property Insurance protects your physical assets from damage, vandalism, or theft.

Liability Insurance protects the assets of your business if you are sued for bodily injury, property damage, professional errors, and more. It can help reimburse money spent on lawsuits, legal fees, and settlement costs.

General Liability Insurance is a common starting point for most businesses. This insurance protects your business from claims of third-party bodily injury to customers, property damage, or advertising injuries.

The average insurance company will offer a policy that will pay up to $1 million per occurrence, with a maximum aggregate of $2 million. However, some policies can start as low as $300,000.

Some businesses have unique risks that require specialized insurance coverage. For example, if you're in the food service industry, you might need liquor liability insurance to protect against lawsuits related to serving alcohol.

Other types of businesses that may require specialized insurance coverage include those that offer professional services or advice. In these cases, errors and omissions insurance (also known as E&O or professional liability insurance) can provide financial protection against lawsuits related to professional mistakes.

If you have employees, you'll likely need workers' compensation insurance to cover medical expenses and lost wages in the event of a workplace accident.

If you're a retailer, product liability insurance can help protect against lawsuits related to defective or hazardous products.

Most states require workers' compensation insurance if you have employees, and commercial property insurance can help pay for a replacement or repair for your business property if it's damaged, lost, or stolen.

Here are some examples of business types that may require specialized insurance coverage:

If you're running a business that offers professional services or advice, you'll likely need errors and omissions insurance, also known as E&O or professional liability insurance.

Discover more: When Is Professional Liability Insurance Required

Client contracts often require a minimum coverage limit of $1 million for this type of insurance.

Construction companies face greater general liability exposure due to the risks of property damage or bodily injury.

Businesses that involve hazardous materials, construction, manufacturing, or other high-risk activities can expect to pay more for their general liability insurance.

There are two common categories of business insurance: property insurance and liability insurance.

Property insurance protects physical assets such as buildings, equipment, inventory, and other business property from damage, vandalism, or theft.

Liability insurance protects the assets of your business if you're sued for bodily injury, property damage, professional errors, and more.

The amount of property or liability insurance you need depends on factors such as the type of business you operate, the number of employees you have, and the level of risk associated with your business.

Here are some examples of business types and the types of insurance they may need:

Note that this is not an exhaustive list, and you should consult with an insurance professional to determine the specific insurance needs of your business.

Your business operations have a major impact on the cost of general liability insurance, with more dangerous occupations coming with higher premiums.

A construction company, for example, may face greater general liability exposure than an accounting firm due to the increased risk of property damage or bodily injury.

Annual revenue is another significant factor, with businesses earning more money facing higher premiums due to increased exposure and risk.

The location of your business also plays a role, with different states and regions having varying insurance costs.

A $0 payroll tier can cost as little as $790 to $1,050 for a Contractor General Liability policy in California, while a $100k+ payroll tier can cost $1,965 or more.

The cost of a policy is based on several factors, including payroll, subcontractor costs, gross receipts, and location.

Here's a breakdown of the average policy costs for different payroll tiers:

Policy limits also affect the cost, with a $2 million aggregate limit typically costing around $15 more than a $1 million limit.

Businesses should consider their financial situation, type of work, and state laws when deciding on their policy limits.

The policy limit you choose can significantly affect your general liability insurance premium. A common misconception is that there's a large difference in price between a $1 million and a $2 million aggregate limit, but in reality, the variance is typically only around $15.

The number of employees you have can also impact your premium. As the number of employees increases, so does the potential for general liability claims. This is because more employees mean more work and services provided, which increases the likelihood of a loss.

The type of work you do and your industry-specific risks are also crucial factors in determining your policy limit and premium. For example, if you work in a high-risk industry, you may need a higher policy limit to protect your assets and liabilities.

Most businesses choose a general liability policy with a Per Occurrence Limit of $1 million and Aggregate Limits of $2 million. However, these figures can vary depending on the size of your company and its industry-specific risks.

Here are some general guidelines to consider when choosing your policy limit and premium:

Keep in mind that policy age, experience, and credit score can also affect your premium, but these factors may not be used by all insurance carriers.

Business owners should consider their financial situation, the type of work they do, and the state laws associated with their area when deciding on their policy limit and premium.

Business operations have a significant impact on the cost of general liability insurance. This is because the type of work you do will determine the risks associated with your business.

Some businesses are more likely to experience property damage or bodily injury, such as construction companies, which may face greater general liability exposure than an accounting firm. This is reflected in higher general liability insurance premiums for high-risk industries.

Businesses that operate in less hazardous industries, like accounting firms, can expect to pay lower premiums. It's essential to consider your business operations and the associated risks when determining the amount of general liability coverage you need.

Here's a rough guide to help you estimate your general liability insurance costs:

Keep in mind that these are general guidelines, and your specific business operations may require more or less coverage.

Business operations have a significant impact on general liability insurance premiums. The type of work you do determines the risks associated with your business.

A construction company, for instance, faces greater general liability exposure due to the higher likelihood of property damage or bodily injury. This is in contrast to an accounting firm, which carries less risk.

More dangerous occupations come with higher general liability insurance premiums. Businesses that involve hazardous materials, construction, manufacturing, or other high-risk activities can expect to pay more.

Construction companies are more likely to experience property damage or bodily injury, which increases their general liability exposure. This is why they often pay more for their general liability insurance.

As a contractor, understanding how claims work is crucial for your business operations and coverage. Occurrence policies cover claims that occur during the policy period, regardless of when the claim is filed.

There are two types of general liability insurance based on what claims are covered: occurrence and claims-made. Claims-made policies cover claims only when both the occurrence and the resulting claim happen during the period the policy is in force.

For more insights, see: Is Bop Liability Coverage Claims Made

A claim typically may be reported up to ten years following the policy period on an occurrence policy. This is why it's a best practice to have an occurrence policy with the ten year tail for claim reporting.

The insurance company has a duty to defend the insured contractor, but has discretion to settle any suit. Contractors are responsible for paying the deductible, and the insurance company will cover the balance of damages and/or medical payments up to the policy limits.

Consider reading: When Doing Business in This State an Insurance Company

A Contractor General Liability policy covers third party claims from damages that arise from the operations of the insured contractor business.

Coverage does not include faulty workmanship or damages to the insured’s work. Coverage applies to claims including bodily injury, property damage, product and completed operations, medical payments and personal and advertising injury.

Here are the descriptions of the coverages:

A policy will often have coverage with limits of $1 million per occurrence, $2 million in aggregate and $2 million product/completed operations.