Starting your own business has many benefits, from job security to control over your time and finances. However, all companies come with inherent risks. As a business owner, you become responsible for many people like your employees and customers. Thus, one main risk you face is a potential liability, which may arise from unforeseen circumstances.
Given this concern, it is worth investing in small business insurance to safeguard your company from the financial consequences of liability. Even the slightest mishap can cost a lot for your business, so insurance helps you stay proactive by protecting your bottom line and reputation.
What is General Liability Insurance?
Commercial general liability insurance provides coverage for property damage, bodily injury, and advertising injury claims made by a third party against your business. Specifically, it covers non-professional negligent acts, such as when a customer trips on your premises, or you get sued for copyright infringement.
If any of the covered risks happen, your policy will help for legal fees, medical expenses, settlements, and other associated costs—up until your liability limit.
Factors Affecting General Liability Insurance Costs
As a small business owner, the extra expense may be a factor when buying insurance, given that you have limited funds. Generally, small business insurance rates can vary significantly, so it is difficult to give a fixed number concerning price. But to provide you with a better picture, here are some of the main factors that affect your insurance costs:
Some industries carry more risk than others. For example, construction sites are notorious for liabilities due to the industry’s high risk of workplace hazards.As a result, insurance premiums are higher here than in a lower-risk sectors, such as retail or office corporations.
Broadly speaking, insurance rates differ from one state to another. However, premiums can change within states depending on your business location. If your area is vulnerable to natural disasters, this can damage your property and increase the risk of employees or customers getting injured.
Number of Employees
Insurance companies usually gauge the size of your business by looking at the number of employees. Generally, more employees signify more risk since there is a higher chance of a lawsuit.
The more claims your business files, the higher the risk perceived by insurance companies. Thus, you will likely pay higher premiums if you have filed several claims in the past months or years.
Businesses with higher incomes have more to lose from a liability claim. A high income usually means you work with more customers, which increases the risk of injury or damage. Thus, your revenue will significantly impact how much your insurance costs turn out.
With several factors involved in calculating insurance premiums, it is clear that every business is unique. As such, the rates for one company can be drastically different from that of another. The best way to estimate how much you might spend will be to compare quotes across companies or speak with an agent to discuss your needs in more detail.
Regardless of how much you emphasize safety and caution, you never know when one small mistake can lead to a liability claim. However, one case can already do so much damage, so getting insurance coverage protects your businesses from these situations.