If you're thinking about taking the leap into small business ownership, there's many things to consider and insurance is certainly one of them. Not only that, but since most small businesses have limited start up money, the cost of the insurance is pretty important. This article gives you some tips to help understand how the cost of general liability insurance for a small business is calculated.
But first, let's define a few terms to help us along....
What is General Liability insurance?
When most people think of business insurance, general liability insurance is the first thing that comes to mind. In its simplest form, general liability insurance provides coverage for the legal liability of an insured for bodily injury or property damage to others arising out of the business premises or operations (ongoing and completed operations). "To others" is important here. It does not cover bodily injury or property damage to an insured, the employees or an insured's property.
Factors that help determine the cost of a general liability insurance policy for a small business
General Liability Insurance Cost Factor 1: Type of operation
A small gift shop or retail store will generally be less costly than a concrete contractor. The reason is simple: a small gift or retail shop is low-risk, while there is more risk of bodily injury or property damage occurring with a contractor- they're mobile, doing more hazardous work, around more people, you get the idea. So the type of business you open will have a big impact on cost.
General Liability Insurance Cost Factor 2: Size of operation
General liability insurance is rated based on a number of items (depending on the type of operation). So for example, a restaurant may be rated based on annual sales. A restaurant with $250,000 in sales will be a lower premium than one that has $750,000 in annual sales.
General Liability Insurance Cost Factor 3: Location of operation
If your business is located in a high traffic area (either foot traffic or just a more urban environment), there's a better chance that the premium will be higher than if your business is located in a more rural, low traffic setting.
General Liability Insurance Cost Factor 4: Your experience
Length of time in your business and financial stability can easily have an impact on your premium.
General Liability Insurance Cost Factor 5: Coverage Amount
The more coverage you have, the more premium you'll pay. So you can expect that buying a $300,000 liability policy will cost less than a $1 million policy. That being said, there is often a small difference in premium between the lower limit and the higher, so it's worth it to check out.
General Liability Insurance Cost Factor 6: Insurance company rules
Most insurance companies have a minimum premium they charge to even issue a policy. So for example, a typical annual minimum policy premium for general liability insurance is $500. Your small gift shop may only generate $20,000 in sales, but you'll still pay $500.
For more information about Ohio small business insurance, please read our article "Ohio Small Business Insurance: What You Need to Know."
If you're a small business owner, or one that may be just starting out, figuring out what insurance you need and even what it means can be confusing and difficult. General liability insurance is usually the first type of business insurance you'll need. Although cost is unique among businesses, the 6 factors mentioned above help give an idea of how general liability insurance cost is calculated. To get a general liability insurance quote unique to YOUR business, please give us a call at (937) 592-4871 or request a quote on our website.