How Much is General Liability Insurance? This article can provide essential information so you can know what to expect.
General Liability Insurance is essential for any business. Injuries and property damage due to accidents, contractor errors, or other things can happen at any time and in any place. With the right general liability policy, you’ll be protected from lawsuits when they do.
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According to the Small Business Association, the cost of a general liability policy typically costs from $500 to $1,200 a year or $42 to $170 per month depending on the industry you work in.
In this article, we’ll focus on the cost of general liability for contractors and drill down to uncover how general liability costs are affected by various limits, riders, claims, and the industry you operate in.
What does General Liability Insurance Cover?
A contractor’s general liability policy provides the foundational coverages that are needed in the package of insurance policies that almost every contractor needs.
Third-Party Bodily Injury and Property Damage
The policy will cover your liability for injuries or property damage to a third party. This coverage will protect your business if a customer or other third party is injured at the job site or, because of your business activities their property is damaged.
If someone brings a lawsuit against your business over libel, slander. Copyright infringement, your general liability insurance will pay for your legal expenses and damages awarded by the court.
Not all damage or injury to people or property happens at the business. A business can be held liable for the damage its products cause to people or property. The GL policy will cover defense costs and monetary damages awarded by the court.
What Factors Determine General Liability Rates?
A contractor’s cost for general liability insurance depends on many risk factors. All factors that will impact your general liability insurance rates are measured when your policy is underwritten.
Depending on the size of your business and the industry you operate in, these underwriting factors will be measured from information on your application or by a physical inspection of your business.
The most common risk factors that insurance companies will consider when calculating your annual premium are:
- Industry (GL code)
- The location of your business
- Sales and revenues your business generates annually
- Years in business
- How the business is organized (LLC, Corporation, Sole Proprietor, etc.)
- Number of customers
- Loss history and claims paid
- Coverage history, as well as cancelations, declined applications, and non-renewals
- Any evidence of company officers being charged or convicted for arson, bribery, or insurance fraud.
- Any OSHA violations or uncorrected safety code violations
Generally, the size of your business and the industry your in will determine whether you must respond to some or all of the above-listed underwriting factors.
How Your Industry Can Impact Your Cost of General Liability Insurance
The most important factor insurers consider when determining your premium is the risk of your industry. Some industries are inherently riskier than others.
For example, a roofing contractor is in a much riskier industry than a painter because of the inherent risk while working on the roof of a building. Moreover, that risk will increase if the roofer works on tall commercial buildings.
On the other hand, a housekeeping contract faces a much lower risk than a contractor who uses hazardous tools and equipment at the job site.
How Policy Limits Can Impact Your Cost of General Liability Insurance
Your policy limits will also have an impact on your general liability policy. Certainly, a policy with a $500,000 limit will cost less than one with a $1 million limit because the company’s risk is half that of the $1 million policy.
How your limits are stated in the policy will also come into play. You’ll generally be offered a choice of split limits or combined sing limit (CSL).
For example, a GL policy can be written where it will pay a single limit of $2 million per claim. Or, the policy could be written where it will pay $1 million per person per accident for bodily injury, but with a maximum of $2 million.
Since the insurance company is accepting a lower risk for the split limit policy, the rates are generally lower. So if you’re wondering how much is general liability insurance, it primarily depends on your industry and your limits.
General Liability Policy Riders
Depending on the insurance company you select, you’ll likely be offered several riders that will broaden your coverage for various other risks:
Liquor Liability Coverage
Liquor liability insurance is added coverage that helps protect business owners against lawsuits related to alcohol-related accidents. Liquor liability insurance can be purchased as an added form of liability protection or as a stand-alone policy.
For example, let’s say ABC Plumbing Company decides to throw a party for all of its customers. The party would include awards for employees, dinner, and an open bar. Mr. Smith has too much to drink at the party and is involved in a deadly car crash on his way home and then sues ABC Plumbing Company for offering him the cocktails that caused his intoxication and then allowing him to drive home instead of calling a taxi.
In this case, the general liability policy would respond to the claim since the Liquor Liability rider was added to the policy before the claim.
Pollution Liability Coverage
This type of insurance protects businesses against both gradual and sudden pollution-caused liabilities. Gradual exposures include damage to environmental assets that develop over time. This can include environmental contamination or damage to irrigation systems, crop production, etc.
Directors and Officers Liability Coverage
Directors and Officers liability insurance (D&O) protects corporate executives from civil lawsuits resulting from the company’s actions. It provides financial protection against claims that they committed fraudulent acts or other wrongdoing while employed in their jobs.
What other Coverages Should a Contractor Carry?
Contractors should consider a commercial general liability insurance policy as a foundation to build on with other policies that can mitigate the everyday risks of owning and operating their contracting business.
Here is What We Recommend
General Liability: Contractors General Liability will be the foundation of protection for your business. The coverage will respond if you or your employees are found liable for bodily injury, property damage, or have a products/completed operations complaint. The coverage also covers defense costs for your business to respond to any lawsuits brought by a third party.
Workers’ Comp: Many states will require contractors to provide workers’ compensation coverage for their workers before they can begin a project. Accidents will happen at the job site that can result in an employee becoming injured and missing work. Your workers’ compensation coverage will provide financial assistance for medical expenses and lost wages.
Surety Bonds: It’s very likely that your state will require you to be licensed before you can begin operations. Most states and customers will require contractors to offer a license or surety bond before you are allowed to bid on a job or begin working.
Commercial Auto: Typically, most contractors will have light and heavy vehicles that require commercial auto insurance to make certain their vehicles can be repaired or replaced in the event of an accident, vandalism, or theft.
Tool Coverage: Also known as Inland Marine Insurance, this policy will provide for reimbursement for expenses to repair or replace tools and equipment. Your tools represent an important part of your livelihood, so we always encourage carpentry contractors to consider this valuable coverage.