Have you ever wondered what affects the cost of your general liability insurance premium? How are these premiums calculated? Well, understanding the factors that can impact your insurance premium can help you get the most out of your insurance coverage and save money in the long run. In this blog post, we will break down everything you need to know about commercial general liability insurance premiums and how they are determined.
Here we go!
How does general liability insurance cost vary?
You may have observed that the cost of general liability insurance coverage varies from one insurance provider to another, and from one insured business to another. When it comes to business insurance, insurers assess how much risk they are taking on. They need to know about your business, its operations, and where potential vulnerabilities may lie.
Here are some of the factors that can influence the cost of business general liability insurance for owners. Let's look at these factors one by one-
- The size and condition of your business premises
General liability insurance protects your business from the cost of premises liability claims. The price of your insurance coverage depends on the size of your building and the condition of its physical elements. The larger your premises are, the greater the chance of third-party injuries or property damage (if your property is open to the public), which can raise your premiums. Insurers also consider the age and condition of the building. Older construction with a lack of accessibility can raise general liability insurance rates because it's considered a higher risk.
2. Class code and payroll information
To classify businesses based on their overall risks, insurance providers use general liability class codes. These codes group businesses that perform similar work and face similar risks. It allows insurers to estimate the costs and level of claims within each code group by analysing claims within similar fields and locations. Your class code can also be utilised to reject claims if they are related to areas outside your normal business operations.
The size of your payroll, your gross sales, and the size and type of buildings you own, or lease will be taken into consideration when determining your insurance needs. As an example, if you owned and operated a catering business and expanded to own a restaurant or food carts, your general liability insurance would likely not cover these changes. It is likely that your insurer would want to know about these changes in advance and would adjust your class code and premium accordingly.
3. Business Operations and Industry
The nature of the work being performed by the business can have a significant impact on the cost of general liability insurance. There are different kinds of risks associated with different businesses. For instance, construction businesses tend to be at high risk due to their high rate of property claims and injuries. Professional services, such as consultants, tend to be low risk.
It is important to note that within these industries, every profession has its own set of hazards and vulnerabilities. Generally, the higher the risk profile of your industry, the higher your premiums will be.
4. Professional, business, or field experience
Insurance providers may also take into account prior experience and the longevity of the business. More experienced businesses with certifications and licenses may be considered at lower risk and could face lower premiums. The financial stability of your business can also influence your insurance premiums. Don't be surprised if your insurance application asks about your years of business experience and your company’s professional expertise.
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5. Employee headcount
Your company's general liability coverage protects you if an employee accidentally damages someone else's property (for example, spilling coffee on a client's laptop). That client can sue your company for replacement or repair costs if your employees damage others' property.
The number of full and part-time employees, as well as the number of subcontractors and consultants you employ, will likely be requested in your application so that your provider can accurately assess your risks.
6. Business Location
The location of your business can also impact the cost of insurance. Areas with a higher risk of accidents or natural disasters may result in higher premiums. Moreover, businesses located in areas with high crime rates may pay more for general liability insurance. Companies located in areas with less crime will likely have lower liability insurance rates. It is also common to find higher premiums in high-traffic areas since there are more people through your doors.
7. Claims History
Insurance providers will also take into account the claims history of a business when determining premiums. Businesses with a history of excessive claims may be considered at higher risk and could face higher premiums.
8. Coverage limits and deductibles
Generally, the above factors are beyond your control, but you can choose how much insurance to pay by carefully selecting your coverage limits and deductibles. You will have a per-occurrence limit and an aggregate limit on your general liability policy, which is the maximum your insurer will pay for a single claim (usually a year). The higher your coverage limits, the more expensive your policy will be.
The deductible is the amount the business will pay out of pocket before the insurance coverage begins. Higher deductibles can result in lower premiums, but also mean the business will pay more from its pocket, in the event of a claim.
Overall, the cost of general liability insurance in India will depend on a combination of the above-mentioned factors, as well as on the specific insurance provider and the policy being considered. It is important for you to shop around and compare quotes to find the best coverage at the most affordable price. You can save money by cutting out the frills and extra coverage that do not quite apply to your business. If you are confused, you can look for expert recommendations in this regard. BimaKavach gives you the best general liability insurance recommendation in just 5 minutes. Plus, you get expert assistance.
Points to keep in mind while Shopping for the Right Coverage
When shopping for CGL insurance policies, there are a few things you should keep in mind.
- Make sure you understand the coverage limits of the policy. You will want to ensure the policy covers all your potential risks, including third-party property damage and bodily injury.
- Do not forget to read the fine print of the policy so that you understand exactly what is covered and what is not.
- Consider the deductibles and co-pays associated with the policy. You will want to make sure you can afford the out-of-pocket costs when you need to file a claim.
- You can save money by bundling policies together. A business owner's policy (BOP) combines general liability insurance with commercial property insurance and thus, it can save you money on your general business liability insurance. For most businesses, combining these coverages is usually less expensive than purchasing them separately.
What is a premium audit?
An insurance agency conducts a premium audit to ensure that your insurance coverage and premium are accurate. An audit is usually conducted at the end of a policy period or when you cancel it. It is common for small business owners and new businesses to rely on estimates to prepare their financial projections. Such an audit provides an opportunity to ensure that your insurance coverage and premiums reflect your risk level accurately.
Hope from the discussion above, you have got a fair idea about the factors that can influence the premium of your general liability insurance coverage. Understanding these factors can help you make informed decisions about your coverage and ensure that you get the best rate possible. Click here to find out the difference between CGL and commercial property insurance