What Business Liability Insurance Costs Your Business

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Business Liability Insurance Costs

Why Do You Need Business Liability Insurance?

The mere threat of a lawsuit against your business can chill business growth and expansion. There seems to be horror stories everywhere about frivolous lawsuits that bring companies down seemingly overnight. The good news is that there has been a huge movement on the legal fronts to bat down a lot of frivolous cases. There are also other ways to help protect your business and income from the financial devastation of legal action.

You need to establish a business liability insurance policy that addresses your particular business needs and gives you adequate coverage in all instances. The business liability insurance cost varies, depending on how comprehensive you want and need it to be. The larger your business is and the more interaction you have with the public at your place of business, the more coverage you need to have. Not carrying the right business liability insurance will cost your business more, in fact, it can cost you everything.

Here is a sample quote for a small consulting company that has:

  • Up to 2 staff employees
  • Up to 5 programmers
  • $25,000-$1,000,000 annual revenue
  • Typical annual premium: $500 – $900

One claim for damages exceeding $1 million dollars would financially devastate even the largest “small company.”

Here is a sample quote for a large consulting firm that has:

  • 6-10 staff employees
  • 10-50 programmers
  • $3-$10 million annual revenue
  • Annual Premium: $3,646 with $1,000 property deductible

A larger company will have higher overhead expenses. A $1 million dollar claim against any business without coverage can have a very devastating outcome and can force companies into bankruptcy or at least having to let go of many employees.

What Is Business Liability Insurance?

The accurate business liability insurance definition is “a premium paid to an insurer that provides protection from lawsuits and other legal actions taken against your services, products or any monetary or bodily injury related to services, products, negligence and work-related hazards of your business and/or profession”. Depending on the size and scope of your business, this can get pretty detailed.

Let’s now look beyond the business liability insurance definition and seeing the importance of this coverage and how it functions to protect your business. If anyone were to sustain an injury, financial or bodily, from any service your company performs, any product your company sells, faulty equipment and property issues at your place of business, even if it has to do with negligence, your business interests will be protected. It will provide for legal counsel and defense, awards settlements which will keep you and your company going strong.

Types of Business Liability Insurance

Business liability insurance, no matter what form it takes, is often the only real financial protection you have when it comes to lawsuits and claims of injury by clients and/or employees. One big claim can wipe out a company or individual business in one fall of the hammer. Below are some of the types of coverage that you should consider:

General Business Liability Insurance

General business liability insurance covers the basics of conducting business with the general public. The business liability insurance cost to any particular business will vary widely when it comes to what it does, sells and how much public interaction it is involved in. The rates can vary from around $600 to $15,000 dollars annually or more.

Product Liability Insurance

When you sell products you need to protect your business and livelihood from problems arising from defective operation, improper manufacturing and other weaknesses in product design or construction. One serious injury can lead to a lawsuit that wipes you out fast. This type of coverage is also variable and depends on the product being sold and in what quantity. It can be as low as $500 dollars or as high as several thousand dollars per year.

Professional Liability Insurance

Many individuals have to get professional coverage depending on the field they undertake their business in. Fields such as medicine and nursing require practitioners to carry professional liability or malpractice insurance. It helps ensure that the consumer has a way of getting compensation in cases of malpractice injury. It is not a bad idea to carry this type of insurance policy if you are in a field where a simple mistake can cost a lot to rectify. Depending on the type of profession you are in, it is in the neighborhood of $1,000 to $3,000 dollars annually per million dollars of coverage.

Business Liability Insurance Average Cost

The Table of Basic Business Insurance Types and Costs Annually:

 IndividualSmall CompanyLarge Company
General Liability500$500-900$3,000+
Product LiabilityUp to $500$500-3,000$3,000+
Professional Liability$1,000-3,000 per professional per million dollars coverage

Every business, even if you are a sole proprietor, should carry basic business liability insurance. The cost is minimal for the protection it provides. The smaller your business is, the less able you are of absorbing the costs of claims and lawsuits.

You only need to carry product liability insurance if you sell products. Professional liability insurance should be carried by any healthcare professional, psychiatric therapist or individual offering legal or tax advice. Any profession that is subject to a malpractice situation should make professional liability mandatory. If you are unsure, it is a good idea to ask your insurance specialist for advice.

What Affects the Business Liability Insurance Price Range?

There are numerous things an insurer takes into account before setting a rate for certain business liability coverage. Any particular type of coverage within your policy will make a difference to your business liability insurance cost, but there are other critical factors to consider. The following are only a few of the things that are used to determine the business liability insurance price range:

Size of Business and Number of Employees

One good example of how the size of your business and number of employees can affect the pricing of the insurance is in regards to workman’s compensation. It is mandatory to carry coverage so that if an employee is hurt at any time while on duty, his or her medical bills are paid for. If you only have 5 employees it may only cost you around $200 to $300 dollars per year, but having hundreds of employees will increase those costs dramatically. It could be as much as $3,000 or $4,000 dollars.

Product Liability and Risk

There is no doubt that the pricier the product and the riskier it is to use a particular product, the higher the business liability insurance cost will be. A good comparison is the Boeing Corporation versus the Mead Corporation. One designs and manufactures airliners, while the other makes stationary products. If an airliner crashes, there are significant costs to the airline company with the loss of a plane, crew and passengers. There will be countless lawsuits and if it is determined to be a manufacturing defect there will be multi-million dollar lawsuits to be settled. The Mead Corporation products do not generate as much risk. They pay far less for coverage than Boeing for obvious reasons. Risk associated with products can create a difference that is measured in the thousands of dollars each year.

Specialized Insurance Products

Extended liability coverage, inland marine insurance and coverage for transport of hazardous materials will all add even more to the business liability insurance price range. Moving products around means the need to have insurance coverage for your vehicles, employees and the products as well to ensure that every aspect of your business that comes in contact with the public is covered from loss. You never know when a vehicle accident will happen and it would mean losing your products, vehicle and possible injury or death of employees or people that are simply in the wrong place at the wrong time. Each additional insurance product may add hundreds of dollars or more each year to your insurance premium, but it beats having to absorb the loss through company profits and various assets.

Finding the Best Business Liability Insurance Providers

Reviews and Recommendations

If you want to find the best business liability insurance providers then there is no better place than to ask your peers about their experience with insurance companies. Fellow business owners that are happy with their insurance coverage will often provide online recommendations and reviews. Ask other business owners that you know and it will at least give you a starting point.

You can easily check companies in your area and see local reviews through the Council of Better Business Bureaus (BBB).

Rates and Discounts

Cheaper is not always better, but you should expect that a good insurer is going to take a comprehensive look at the coverage your company needs and offer you discounts when you are getting a variety of insurance coverage plans. If for example, you are paying $1,500 for general liability, $1,000 for professional liability and $200 for workman’s compensation you are spending a total of $2,700 dollars. You should be able to get a discount for each additional product that you add. Good business liability insurance providers will be happy to negotiate a discount for your business.

Here are a couple of sites that can offer you rate comparisons:

Customer Service

How easy is it to get hold of your agent or anyone in customer service when you have a question or want to make changes to your existing policies? You need to make sure that your proposed insurance provider is responsive to your needs. If you have a question about the policy coverage, you need to ensure that you have a phone number for an agent or customer service center that can address your particular question. They need to be knowledgeable of the laws and applications of policies in the state that you operate your business in.

The claims process should not be a mystery. If someone has filed a lawsuit against your business then you need to be able to talk to an agent that can help out and walk you through the process of protecting your business. You need to find a company that views you as more than a monthly premium paycheck.

Assessments and Suggestions

You can save a lot of money on your business liability insurance cost if you can eliminate as much risk as possible when it comes to safety at your workplace, burglar-proofing and making sure that your building can withstand the test of time. Good business liability insurance providers will be able to help you put your best foot forward, which will give you the best insurance rates.

If you have a warehouse or building with employees working at the facility daily, I recommend that you install as many safety features as possible. There are many ways to safeguard against injuries and accidents that you may or may not be aware of. A risk assessment can be done by an insurance specialist who will make recommendations about how to reduce risks of injuries to employees, customers and you.

If your company deals with confidential and sensitive information, you are prone to being hacked or having information breached or stolen. A risk assessment professional can offer you the best suggestions to help you keep your and your client’s information secure. This will help reduce or even eliminate any potential risks to your business and also help bring down your insurance rates.


Having to file a claim can be stressful. If you have to jump through an excessive number of hoops, then you may not be dealing with the best in business liability insurance provider. The claims process should be easy and transparent. You also need to check and make sure that the provider has a good reputation when it comes to paying claims.

Business Liability Insurance for Sole Proprietor

Unless you are single-handedly manufacturing and delivering nuclear weapons, being a sole proprietor is going to be the most inexpensive business liability insurance costs there is. Most individually owned and operated businesses carry very little risk, so the insurance rates are going to be reasonable and cheaper compared with small businesses with multiple employees.

Your general business liability insurance cost should be in the range of $500 to $800 dollars a year. Your product liability insurance rate will vary, but the less products you are dealing with, the more affordable the rate will be. You will not have to carry workman’s compensation since you have no employees. If you rarely have clients or customers at your place of business, the cost will be even lower. You can easily find total coverage for under $2,000 dollars a year.

There are other special considerations for you to consider if you are a sole proprietor. You may also look into a health insurance product to cover any injuries you sustain while you are working. If you are operating out of your home, do not assume that your house insurance coverage will cover your business. You have to let your insurer know so that they can add a proviso to your current insurance plan. It is important you do this so that any resulting claims will be paid.

Many business owners falsely assume that if they are running a business on their own, then their chances of a lawsuit or civil action are minimal. You are actually exposed to as much at risk as nearly any other business. If you are managing a business on your own, there could be a higher chance of you making a mistake; this is especially true if you are extremely busy and under pressure. An example could be the omission of a critical element of a necessary service, such as preparing taxes for one of your clients. If it is done incorrectly and the client is audited, you may face the possibility of legal action.

It is important to understand that no business is too small to need business liability insurance. You could prevent legal lawsuits with the right representation, but covering those legal costs could cost you a small fortune and wipe out all of your business’ profits. A simple policy to protect your business is the most sensible decision you will ever make. Peace of mind is worth the business liability insurance cost.

Business Liability Insurance Cost as Risk Management

The harsh reality about businesses is that you can never predict the behavior of individual customers or predict when an injury will happen. Very few companies would survive if they knowingly sold dangerous products or offered shoddy services that caused a lot of problems to clients. They would be driven out of business simply by bad word-of-mouth advertising. What you have to understand is that there are going to be tough days. You may be doing your best, but an undetected problem with a product can suddenly expose you to legal action.

Without the protection of business liability insurance coverage, you can find yourself embroiled in expensive litigation and getting liens on your property and garnishments against your income for a very long time. If you sell a product that has caused serious injury or death, you could be looking at a huge payout. Your decision to save a few hundred dollars can cost you everything.

I suggest that you sit down with a business insurance expert and discuss what your needs are. It is always better to be prepared and have a little more coverage than necessary to guard against the loss of your business and livelihood. Your business liability insurance provider will look at every aspect of your business and show you where your weaknesses lie. You could require coverage that you never really thought of when you started your business.

Whether you are just starting out in business or have been around for quite some time, business liability insurance should be a priority. The fact is that no matter how impeccable a job you do, or how good a service you provide, or how perfect a product you produce is, mistakes can and do happen. One off-product or off-day in providing a service can bring about legal actions that take years and thousands of dollars in legal fees; not to mention that this can financially wipe you out.

Take the risk out of doing business by signing up for an affordable business liability insurance with a reputable business liability insurance provider that offers you the protection you need.

What is Liability Insurance?