How Much Does Business Liability Insurance Cost?

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What is business liability insurance and when do I need it?
Can you provide an estimate of how much business liability insurance costs?
What about costs for small businesses?
Are large businesses any different?
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What is business liability insurance and when do I need it?

I’m thinking about starting a business and I keep hearing the word “liability” when I’m trying to figure out the best insurance coverage for what I want to do. I sort of understand what business liability insurance covers, but I’m still a bit unclear on when I need it. Can you give me a general overview of the whole thing?

It’s really important that you understand the concepts behind business liability insurance before you worry about the costs. The reason is that what it covers and when you need it will also factor into the costs. 

The best way to think about business liability insurance is as protection for stuff you can lose and people who can sue you. The more stuff you have to lose and people you have to sue you, the more coverage you’re going to need. 

What more people tend to care about is whether they’re required to purchase business liability insurance. My answer is that it depends: You aren’t legally required to purchase it, but you could be required to purchase it by a business contract you enter into. If you aren’t contractually obligated to buy it, it’s up to you. If the costs of insurance don’t outweigh the risks without it, you don’t have to buy it. 

However, I always recommend speaking to a TrustedChoice.com independent insurance agent before you decide one way or another. They can listen to what’s going on in your business and help you make an informed choice.

Can you provide an estimate of how much business liability insurance costs?

Let’s say I decide to buy business liability insurance. Is there a range of costs I can expect to pay?

The short answer is yes. However, the more accurate answer is that you could pay anything from $1,000 to $300 million per year as premium. It all depends on:

• What you’re doing
• The scale of what you’re doing, and 
• The stakes of what’s involved. 

Think of this as the difference between a teenager mowing lawns and Exxon. 

Now, some bigger businesses (and I do mean big) have captives. Captives are essentially insurance companies funded by the business itself that the business then pays to insure it. This requires a lot of money and lawyers, but in the end, it saves companies that are large enough a lot of money. If you’re reading this right now, you probably don’t need to concern yourself with captives, but it’s still worth mentioning.

I know that this price range is pretty big. That being said, my best recommendation is to speak with your TrustedChoice.com independent agent to get a better idea of where you land on the spectrum after considering what you’re doing, the scale of what you’re doing, and the stakes.

What about costs for small businesses?

So what will liability insurance cost for a small business?

I’m going to first reiterate that the best way to determine the costs of general liability insurance is to speak to a TrustedChoice.com independent agent. Only they can consider your unique circumstances to give you an accurate estimate. 

An example of a small business that would only pay a premium of about $1,000 per year is a corner food stand. If you're operating a stand like that, you probably don’t have any (or many) employees and liability is probably pretty low. If you turn that food stand into a restaurant with employees, deep fryers, and other potential liabilities (like customers dining in and potentially hurting themselves on the premises), then you’re going to start paying more.

See how the factors work together?

Are large businesses any different?

If I ask about the cost of general liability insurance for a large business, am I asking in vain?

Sort of, but only because the best resource for an accurate quote is your TrustedChoice.com independent insurance agent. Remember the three factors we discussed above:

1. What you’re doing
2. The scale of what you’re doing
3. The stakes of what you’re doing

Bigger businesses are generally doing things on a bigger scale and with bigger stakes, should something go wrong. This means that of course your premium is going to be more than it would be if you were operating something a bit smaller. But again, there’s no way of telling – without discussing the specifics of your business – how much it’s going to cost. Call your TrustedChoice.com independent agent when you want to learn more.