Shopping for liability insurance can feel daunting to any small business owner, especially when it comes to understanding the cost. Being aware of the average cost of liability insurance and the factors that affect it helps you avoid sticker shock, gives you the confidence to identify when a quote is unusually high or low, and gives you insight into why your quote may differ from the average price. Let’s break down liability insurance, average costs, and what influences your quote so you can be an empowered buyer and make the next choice for your small business needs.
Liability insurance, also known as business liability insurance or general liability insurance, protects businesses from third-party claims of injury or property damage. It also protects a company from third-party claims of slander, libel, and other reputational damages and copyright infringement.
A business’s general liability policy protects them from paying financial damages associated with third-party claims, including medical bills, legal fees, settlement bonds and judgments, lost wages, and defending lawsuits.
It’s important to note that general liability protects you, the insured business, from financial damages associated with third-party claims but does not cover the associated costs if these incidents were to happen to you.
For example, liability insurance covers a customer falling in your store but does not cover the expenses if an employee falls at work. Other insurance policies can cover incidents that happen to you, the insured party.
It’s crucial that small businesses have a liability policy. In fact, many cannot operate without one. Clients, financial lenders, and landlords usually require that businesses they work with have a general liability policy. Additionally, having a liability policy prevents unforeseen expenses if an incident occurs. Liability insurance is an investment in the future of your business, keeping it financially secure so you can continue to thrive.
The average cost of liability insurance in 2024 is $42/month, or $504/year. However, that’s just an average. Let’s look at what factors will affect the cost of your policy based on the type of business you run.
If you run a business that works out of a physical location, whether it’s your home or an office you rent, and is desk-based - like a law firm or an accounting business - these factors will affect your liability insurance costs the most.
These three factors can tell your insurance agent a lot about your expenses and operating costs, and you can expect your premium to increase as your revenue increases. You can also expect your premium to increase as you expand your payroll and the number of employees working for you. The more money you bring in and the more people you have interacting with the public on behalf of your business, the higher your risk exposure is in the eyes of your insurer.
Suppose you run a labor-based business that provides services like lawn care, roofing, contractor services, or other kinds of manual labor. In that case, these factors will affect your liability insurance cost the most.
Insurers consider employee count and payroll first when evaluating the cost of liability insurance for a labor-based business. The second factor considered is risk exposure. Trade jobs can be more high-risk. Are you doing work high up? Is there a high risk of injury? Are your employees operating heavy machinery?
You and your insurance agent will discuss these questions when considering risk exposure. They’ll also consider subcontractors – if you work with any, how many, and if those subcontractors have their own insurance. The last factor considered is your overall gross revenue.
Now that you know more about what’s informing the average cost of liability insurance, let’s look at what you can expect regarding policy pricing changes in 2025, whether you’re a current policyholder or looking at getting your first liability policy.
As we look to next year, businesses can expect continued price increases for liability insurance and non-renewals. Some carriers may be pulling out of specific markets holistically. If you get a notice from your insurance company, whether it’s notifying you of a rate increase or cancellation, open it and act promptly.
With rising prices and increased non-renewals, it may be harder to get affordable coverage if you wait. Right now, business owners can expect it to take a few weeks to get a quote back – so there isn’t any time to waste proactively seeking new coverage once you know you need it.
It may not seem like coverage is affordable with the rate increases in liability insurance.
Monarrez points out that it's worth shopping early to avoid the higher rates associated with waiting until the last minute. If you’re unsure where to start or overwhelmed with your options, start with our trusted insurance brokers at CoverHound.
Liability insurance is a crucial piece of comprehensive insurance coverage. While cost can be a big concern for many business owners, liability insurance is a vital investment in the safety and longevity of your business.
Understanding the average cost of liability insurance before you start the buying process will help you be a discerning buyer and make the best decision for your business’s future.
CoverHound’s easy-to-navigate online insurance platform simplifies the buying process by giving small business owners access to 50+ carriers. With our insurance experts there to guide you and answer questions every step of the way, you can get the insurance your business needs. Get your free, customized insurance quote in less than five minutes when you take our online quiz today.
Insurance shopping simplified
Insurance shopping simplified
