Imagine a customer slips in your office, or a contractor damages property on a job. Would your business survive the financial fallout? That’s where liability insurance comes in. It’s essential for small businesses to operate smoothly—not only for covering unexpected incidents but also because most landlords and clients require it. So whether you’re opening a new office or taking on a high-value client, small business liability insurance is a must.
But while its importance is clear, understanding how much liability insurance costs—and ensuring you’re not paying too much or too little—is where it often gets tricky. Even so, 90% of small business owners aren’t sure their policy is truly protecting them. Without clarity, it’s hard to view liability insurance as an investment rather than just another expense.
Today, we’ll discuss how much liability insurance costs for a small business and how to make sure you’re getting the best coverage for your business’s unique needs.
To understand how much liability insurance costs for a small business, we first have to understand what it covers. General liability insurance, often shortened to liability insurance, covers financial loss due to injury to a third party or damage to third-party property when these injuries or damages are associated with your work.
These costs can include medical and legal expenses. They can also cover costs associated with accusations of libel or slander. Every business will have different coverage needs and costs based on its type—office-based or labor-based. However, the factors affecting how much liability insurance costs for small business are similar across all businesses.
Gross revenue is the highest factor taken into consideration for office-based businesses and the last factor taken into consideration for labor-based businesses. Insurance underwriters view gross revenue as an indicator of your business's size and how many services or products you provide to your customers. The more you make, the more you stand to lose, so you can expect insurance premiums to rise as your revenue increases.
Unlike gross revenue, risk exposure is only considered if you have a labor-based business - like roofing, contracting, lawn care, or some other type of business that requires manual labor from you, your employees, or subcontractors regularly.
Different types of labor-based businesses will have different risk exposure. A landscaping company focusing on designing and planting flower beds will have a lower risk exposure than a landscaping and lawn care company using heavy machinery in its daily operations. Your liability policy premium will go up based on the risk exposure of your business.
Employee count and payroll are evaluated as the first risk factor for labor-based businesses and the second for office-based businesses. Employee count and payroll are indicative of how many contact points your company has with the community. The more employees you have, the more risk exposure you have.
If you use contractors or subcontractors, you’ll talk with your insurance agent about how many you use, what contracts you may have in place, and if you currently require them to have insurance.
Pro Tip: Your subcontractors can decrease or increase your risk exposure depending on their role in your operations. That’s why it’s essential to disclose the ins and outs of your business to a trusted insurance agent.
When looking for a new liability insurance policy or for your first liability insurance policy, it’s essential to compare quotes across multiple carriers. Many people find this process time-consuming, and that’s where all-in-one insurance platforms like CoverHound can help streamline the quoting process.
However you get your quotes, ensure they’re comparable from carrier to carrier. If a quote is too low, this could easily be a sign you’re not getting the coverage you need. It’s also helpful to have an awareness of the average cost of liability insurance when looking for a policy. The current average liability insurance cost is $542/year.
However, keep in mind that’s just an average. If most of your quotes give you a much higher yearly premium, that’s probably appropriate for your business, especially if you have high-risk exposure or a lot of employees.
So, how do you know if a quote is right for your business?
As you prepare to buy your next liability insurance policy, here are some considerations to remember.
As you consider a quote, ask yourself if it would cover your worst-case scenario. If you’re a contractor, your worst-case scenario may be the house you just finished collapsing with ten people inside. Does the policy you are considering cover enough of your “worst-case scenario” for your business to recover?
When looking at liability quotes, and types of insurance for your small business in general, it’s important to prioritize coverages by what your most at risk for. You can consider your most significant risk exposure and what incidents are most likely to happen in your line of work as you navigate the insurance process. If the policy options you’re looking at cover your highest-priority risks, you’re on the right track – and if you aren’t sure, reach out to a trusted insurance advisor like those at CoverHound.
Understanding the fine print of an insurance policy and assessing your business’s risk exposure can require the help of an expert – and it’s always a good idea to get another set of eyes on the policy you’re considering. Work with a financial advisor who knows your business well or one of CoverHound’s trusted insurance brokers when considering your risk exposure and how much coverage you need.
An experienced insurance advisor can help you:
As you prepare to buy your next liability insurance policy, keep in mind that it’s an investment in the future of your business – not just another expense. With help from an expert like those at CoverHound, you can protect your peace of mind as a small business owner.
Liability insurance is a foundational policy for every business owner, protecting you from expenses associated with third-party damages and injuries so you can focus on doing what you do best. Cost is based on factors like risk exposure, gross revenue, and employee count, making liability insurance costs different for every business.
With CoverHound, you can get fast and accurate liablity insurance quotes from over a dozen top-rated carriers designed to fit the coverage needs of your business. CoverHound lets you compare quotes in one place, so you find the right coverage without the hassle. We’ve also got your back beyond business with home, auto, and renters insurance.
Invest in your future quickly and easily with the help of our seasoned insurance experts. Start coverage for your small business within 24 hours when you work with CoverHound. Take our five-minute quiz to get your no-hassle quote and secure peace of mind today
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