If you run a business, taking out a commercial liability insurance plan is a must. Doing so is the only way to truly ensure that your company remains financially protected in the event of an unforeseen negative event.
But shopping for insurance plans in this category can be tough. That’s why we’ve put together this article — to highlight what you should be paying for commercial liability insurance to ensure you get a good deal.
The average monthly cost of commercial liability insurance is between $40 and $60 per month. That means the average annual cost of commercial liability insurances lies between $480 and $720.
That being said, the amount that you have to pay for this type of insurance can vary significantly. So keep reading to learn everything that you need to know about commercial liability insurance prices before you buy.
Here’s some of the most significant pricing information for commercial liability insurance:
- The average company pays between $480 and $720 per month for liability insurance
- High-risk industries like construction and restaurants pay an average of $1,067 and $776 for insurance, respectively
- The provider you pick can influence your costs significantly — retail businesses pay an average of $500 annually through Liberty Mutual but $952 through The Hartford
- Plans with lower limits cost less than plans with higher ones
- Your revenue, location size, and number of employees will also play a role in determining your commercial liability insurance cost
- What It Covers?
- Cost by Industry Type
- Cost by Provider
- Does the number of employees impact liability insurance costs?
- What Factors Impact Pricing
- Who needs commercial liability insurance?
- How To Save Money On Commercial Liability Insurance
- What To Do Before You Buy
- Frequently Asked Questions
- Bottom Line
What It Covers?
Commercial liability insurance is designed to protect companies that have it from legal liability in certain scenarios. The specific scenarios that are covered by a commercial liability insurance policy will vary some based on the plan that you choose.
However, there are some common coverage categories that most plans will have. Here’s a look at three of the most common items covered by commercial liability insurance.
Bodily Injury and Property Damage Liability
When you run a business with a physical location, there’s always a risk that someone gets hurt while visiting it. You also always have the risk of getting your property damaged. Commercial liability insurance provides financial protection to protect you from these risks.
More specifically, commercial liability insurance covers a company’s legal liability for acts that arise out of non-professional negligence. That means you’re financially protected in the event that something damaging occurs on your property that’s outside the normal scope of your business.
Personal and Advertising Injury
With this category of protection, your company gets coverage for certain types of lawsuits that may be filed against it. Essentially, the insurance will cover the cost (or at least a good portion of the costs) of your legal proceedings for one of these types of offenses.
Here are some of the types of lawsuits that are often covered under this category of liability protection:
- Slander and libel
- Copyright infringement
- Use of someone else’s advertising idea
- Invasion of privacy
- False arrest
Many types of commercial liability insurance also cover medical payments. These are any medical payments that are made to non-employees for injuries that occurred on your premises or because of your company’s operations, which are not covered by workers’ comp.
This is really helpful because it lets companies take care of these financial events without feeling the need to engage in costly litigation.
In other words, if you have coverage for non-employee medical payments, you won’t feel the need to try to fight them in court. This brings down the price you have to pay for these events quite significantly.
Cost by Industry Type
The industry that your company operates in can have a very big impact on the amount you have to pay for commercial liability insurance. In fact, research suggests that this is what will have the biggest impact on a small business’s liability insurance premiums.
This is true because the risk of both property damage and personal bodily injury vary greatly from one type of business to another.
For example, a busy retail store will have tons of clients passing through on any given day that it’s open. But a small office that operates primarily online will have very few visitors, thereby significantly reducing the risk of a non-employee injury occurring.
So, which industries get the best deals on commercial liability insurance? Here’s a table to answer that question.
|Industry||Average Annual Liability Insurance Cost|
|IT / Technology||$418|
|Food and Hospitality||$776|
|Media & Advertising||$415|
As you can see from these figures, there is a general rule about how commercial liability insurance costs are impacted by industry. If your company operates in a sector that deals with more people or more dangerous situations than normal, expect to pay more than average for your plan.
Cost by Provider
The commercial liability insurance provider that you choose can have a huge impact on your costs as well. Some insurance companies charge significantly more than others for this type of coverage.For example, check out the following chart, courtesy of our friends at Advisor Smith
Average Cost of Liability Insurance By Provider ($1 million revenue, 10 employees)
This data shows that the amount your company has to pay for liability insurance can vary greatly from one provider to another.
However, it’s important to present a caveat along with this information. Your individual results with each of these providers can, and likely will vary. That means it’s often a good idea to get a quote from each provider that you’re looking at — even if you’ve seen online that they often charge more.
There’s always the chance that the provider will analyze your business scenario differently than expected and present you with a better deal than you anticipated. And it’s always good to be diligent and get this information instead of just assuming that a provider won’t be a good fit for you.
Does the number of employees impact liability insurance costs?
The number of employees that you have will also impact how much you have to pay for liability insurance. Unfortunately, there isn’t any strong data that we can look at to determine exactly how much extra a company tends to have to pay for each additional employee it has.
Just know that the more employees you have, the greater the amount of risk that your company is exposed to. That’s why companies with only a few employees tend to pay less for liability insurance than those that have 50 or more.
The average employee-number groupings for liability insurance plans are 1-5 employees, 6-10 employees, 10-20 employees, and so on.
Of course, this doesn’t necessarily mean that you will always pay more for liability insurance if you have a lot of employees. Each company is unique. You might work in a low-risk industry and pay less in premiums than comparable companies because of that — regardless of how many employees you have.
This is another reminder of the importance of getting quotes from as many companies as you can. The only way you know for sure who will offer you the best deal is to ask around.
What Factors Impact Pricing
The limits of your liability insurance plan will also play a big role in determining how much you have to pay for it. If you don’t know, limits are the maximum amount that the insurance company will payout in the event of an incident.Often, commercial liability plans will have both a per-occurrence limit and an aggregate limit.
A per-occurrence limit is a maximum amount that the insurance company will pay out for any single claim. An aggregate limit is the maximum amount that the insurance company will pay out over the lifetime of the policy.
This usually resets each year that you renew your liability insurance coverage with your provider. The vast majority of small businesses choose plans that have per-occurrence limits around $1 million and aggregate limits of around $2 million.
The average annual cost for liability insurance with a per-occurrence limit of $1 million and an aggregate limit of $2 million is $679. That figure goes up to $708 for a plan with limits of $2 million and $4 million.
The characteristics of your company’s physical location can also influence how much you have to pay for commercial liability insurance. There are two main factors to look at here: the size of your business and where it’s located.
The state that your business is located in will also influence how much you pay for commercial liability insurance. For example, the following states have the most expensive insurance rates in the country:
The general rule about premiums and business size is that the more square footage you have, the more you have to pay in premiums.
However, as is the case with all of these factors, this rule has its exceptions. Some companies with very large physical locations may pay less for liability insurance than companies with smaller locations.
This is because the nature of your business often has a greater impact on the price of your premiums.
For example, restaurants are considered higher-risk than consulting companies. Though a consulting company may have a very large office space and a restaurant may be very small, the restaurant could still pay more in premiums than the consulting company.
Revenue Is a Major Factor In Pricing
Revenue is another factor that will influence the premiums that insurance companies in your area are willing to offer your business. The general rule here is that the more revenue you have, the higher your premiums will be. But, once again, there are some exceptions to this rule.
Revenue is a bigger determining factor in high-risk industries than it is in low-risk ones. For example, offices that have higher revenues may not see their premiums increase by very much. But a restaurant that sees a spike in revenue could face a significantly higher commercial liability insurance cost.
For example, let’s consider an imaginary financial services company and an imaginary restaurant. Each company begins with $250,000 in revenue but grows that figure to $1 million.
The financial services company may begin paying $300 for liability insurance and end up paying $350. But the restaurant may start at $1,000 and end up at $3,000.
Who needs commercial liability insurance?
Every company with physical premises risks being held liable for injuries that take place in them. Businesses that sell products and services also risk being held liable for damages that can arise when a customer uses those.
Given that, the vast majority of companies should seriously consider taking out a commercial liability insurance plan. These plans aren’t exceptionally expensive in the grand scheme of things. And they can save companies tens of thousands of dollars when they’re needed.
Your company may never end up needing to use its commercial liability insurance. But having it will reduce several significant elements of risk from your business model. This will enable you to be more decisive about how you allocate your budget and plan for sustained growth.
How To Save Money On Commercial Liability Insurance
Having to add another monthly cost to your company’s budget doesn’t feel good. But it’s really important to have liability insurance to keep your business protected from costly legal scenarios.
That being said, there are ways to bring down the amount that you have to pay for liability insurance each month. Here are three strategies you can use to make sure that you get the best deal possible on the plan you sign up to use.
Bundle your policies
First, try to bundle as many of your insurance policies together as you possibly can. Often, insurance providers will give you a discount for taking out multiple plans through them.
For example, depending on your company’s risk level, you may be able to bundle your liability insurance plan with a commercial property insurance plan. Doing something like this will likely bring the cost of both plans down.
That’s why, when you’re shopping for liability insurance, you should make sure to ask about bundling. You may find that it’s worth it to move an existing insurance plan over to a new provider if you will get a significant bundling discount for doing so.
Pay your premium upfront
The way that you’ll pay for your commercial liability insurance is through premiums. The standard practice is to pay these monthly. But the vast majority of insurance providers will also give you the option of paying your annual premium amount upfront.
Often, an insurance provider will give you a discount if you do this. So your company will need to figure out what it prefers. You have the option of spreading out its payments with a monthly arrangement so that the immediate impact on your bottom line isn’t as large.
Or, if you have cash sitting around, it may make sense to pay the entire price of the premium upfront to get a discount — even if you experience a greater immediate impact to your bottom line to do so.
Manage your risks
Liability insurance is like any other type of insurance: if your company is seen as lower-risk, you will likely be offered lower premiums. This makes sense. If an insurance provider thinks the risk of you actually using the insurance is relatively low, they won’t charge you as much for it.
So one way to pay less for commercial liability insurance is to maintain a clean claims history. Similar, you can reduce some of the common risks that might lead to a liability claim by doing things like:
- Investing in a high-quality security system for your premises
- Eliminating as many hazards on your property as possible
- Thoroughly training your employees on your safety methods
- Creating checklists and review systems to promote daily security
What To Do Before You Buy
Shopping for commercial liability insurance can be a good of a confusing process if you’re unfamiliar with the industry. That’s why we’ve put together this step-by-step shopping guide. It’ll give you a process to follow so you can make sure that you find the perfect insurance plan for your company’s unique needs.
Identify Coverage Types
The first thing you need to do is understand exactly what type of insurance coverage your company needs. The specific types of liability that you need to be protected against could vary some based on the industry that you operate in.
The key here is understanding both your legal obligations and your financial risks. Any liability insurance that you choose must satisfy all of your legal requirements. And it should reduce your financial risks enough to keep your business secure as well.
Developing this organizational understanding will tell your business whether it just needs commercial liability insurance or something else alongside it. This can give you an idea of whether it might make sense to try and bundle a few types of coverage together to save money on all of them.
It’s also worth taking a moment to understand how the insurance companies that you go to will determine the price you have to pay them for coverage. This matters because it gives you the chance to fix some of the issues that might drive up the cost of your premiums before you agree to pay a specific monthly amount.
For example, things like poor security coverage or a hazardous work environment can significantly increase the cost of commercial liability insurance. It could make sense for your company to fix some of these issues before it seeks out a plan, as doing so could end up saving you quite a bit of money.
Get Multiple Quotes
This is the most important step in the insurance shopping process. It’s absolutely critical that your company seeks out quotes from as many different potential insurance providers as possible.
Doing this is important because the only way to make sure you get the best deal is to make sure you know what all of your options are. Without that knowledge, you risk selecting a plan that’s not as good as what you could have gotten.
We noted this earlier but we’ll do so again here: make sure that you get quotes even from companies that you expect won’t be able to beat your best offer.
You never know what a company will offer you until you speak with them. And you don’t want to leave any of your options undiscovered.
Read The Fine Print
Once you get all of the quotes that are available to your company, it’s time to begin reviewing them in-depth. Every plan that you see will have its own limits, premiums, deductibles, and exclusions, You need to understand how these differ from one another with your various options in order to figure out which plan would be the best fit for your company.
This matters because the last thing that you want to happen is to make a claim one day only to find out that your policy won’t actually cover it. When you carefully review the fine print before making a decision, you ensure that you won’t be surprised by anything in the future.
Coverage & Price – Finding The Ideal Blend
Now that you’ve seen all of your options and reviewed them thoroughly, it’s time to make a decision. Many companies mistakenly use price as the first point of differentiation for their different insurance plan options. However, that’s not the best strategy.
The first thing that you need to do is make sure that an insurance plan meets your minimum coverage needs. Your monthly premium options may only have a $100-$200 gap between them. But if you pick a plan that doesn’t cover something you need coverage for, it could cost your company tens of thousands of dollars.
So the best strategy is to begin by eliminating any quotes that don’t satisfy all of your coverage requirements. Then, once you’ve done that, you can compare price and other coverage aspects that are important to you.
Weigh the remaining options against one another and you’ll be sure to find the liability insurance option that’s best for your company’s unique needs.
Frequently Asked Questions
What types of liability insurance are available?
There are tons of different liability insurance available for businesses to purchase from car dealership insurance to food truck insurance. But the most popular options are the following three — bodily injury and property damages, reputational harm, and advertising errors.
How much does a $1 million business insurance policy cost?
The exact amount that you pay for one of these insurance plans will depend on the unique factors surrounding your company. For example, businesses with more risk tend to pay more for these types of policies.
But with that in mind, the average cost for a $1 million business insurance policy is between $300 and $1,000 per year.
How much is commercial insurance a month?
The median monthly cost for commercial insurance is between $50 and $60. But you could may much more or much less than that depending on the amount of risk that an insurance company says your business has.
What does a commercial liability policy cover?
Commercial liability insurance policies cover the costs that a business would have to pay for things like bodily injury, personal injury, and property damage. But they only cover these things when they are caused by the company’s operations, products, or premises.
What is the difference between commercial general liability and general liability?
These terms are often used interchangeably from one another. Both describe insurance policies that protect companies from legal liability, which may arise during the course of business operations. At most insurance providers, these two terms mean the same thing.
Commercial liability insurance is something that every business needs. It keeps you protected from various legal risks that could financially ruin a company that hasn’t prepared for them.
The exact amount that you pay for commercial liability insurance will vary based on factors like:
- The industry you operate in
- How many employees you have
- How much revenue your business generates
- Your location
- And other factors
But that being said, most small companies should expect to pay anywhere betweeen $400 and $1,200 for commercial liability insurance. As long as your business isn’t high-risk or larger than average, you should expect to pay something in this range as well. You may be interested in EMS director liability insurance costs.