Running a business is challenging, and one of the biggest challenges is managing financial risks. One way of protecting your business from potential financial loss is by purchasing commercial general liability insurance. However, before buying this type of insurance, it’s vital to understand what it covers, how much it costs, and how to lower your premiums. This article will provide comprehensive insights into commercial general liability insurance costs, so read on.
What is Commercial General Liability Insurance?
Commercial general liability insurance (CGL) is a type of business insurance that covers third-party claims for property damage, bodily injury, and personal injury caused by your business operations. The insurance policy offers coverage for legal defense fees and settlement costs, depending on the terms and conditions of the policy.
Businesses need CGL insurance to protect against lawsuits related to customer injuries, alleged negligence, advertising injuries, and damage caused to someone else’s property. By purchasing CGL insurance, business owners can shield their businesses from financial losses that may arise due to a lawsuit.
Types of Commercial General Liability Insurance
There are two types of CGL insurance coverage: claims-made and occurrence-based coverage.
1. Claims-Made Coverage: This type of coverage offers protection if a claim gets filed while the policy is active. If a claim gets reported after the policy expires, it is not covered. Claims-made coverage is more affordable at the start, but when the policy is renewed, premiums can increase significantly.
2. Occurrence-Based Coverage: This type of coverage offers protection for any incidents that occur during the policy period. Even if the claim is filed after the policy term has expired, it will still be covered under this type of policy. Occurrence-based coverage is more expensive than claims-made coverage, but it offers more comprehensive protection.
What Does Commercial General Liability Insurance Cover?
CGL insurance policies generally cover the following types of claims:
1. Bodily Injury Claims: This type of claim pertains to any physical harm or injury caused to someone else while on your business premises or due to your business activities.
2. Property Damage Claims: This type of claim pertains to any damage caused to someone’s property while on your business premises or due to your business activities.
3. Personal Injury Claims: This type of claim pertains to any non-physical harm or injury caused by your business activities, such as defamation, privacy invasion or copyright infringement.
4. Product Liability Claims: This type of claim pertains to any damage or injuries caused by a faulty product that your business produces or sells.
What is Not Covered by Commercial General Liability Insurance?
Commercial General Liability policies typically do not cover the following:
1. Intentional harm caused by the business owner or employees.
2. Professional services offered by the business, such as accounting or legal advice (for this, you will need professional liability insurance).
3. Employee injuries, for which you will need to purchase workers’ compensation insurance.
What Factors Affect Commercial General Liability Insurance Cost?
The overall cost of commercial general liability insurance can vary depending on several factors:
1. Industry: Certain industries are considered more high-risk than others, which affects insurance premiums.
2. Business Size: The number of employees or the size of the business affects the insurance cost. In general, the larger the business, the more expensive the insurance premiums.
3. Coverage Limits: The higher the coverage limits, the more expensive the insurance will be.
4. Location: The area where the business operates can also affect the insurance cost. For example, businesses located in areas prone to natural disasters may have higher premiums.
What are the Average Costs of Commercial General Liability Insurance?
The CGL insurance premium is usually paid annually, but some insurers may allow for monthly or quarterly payments. The average cost of commercial general liability insurance is around $500 to $600 per year. However, this cost can vary significantly depending on the factors mentioned above.
The chart below illustrates the average annual premiums for different industries:
Industry |
Average Annual Cost |
Accounting |
$500-$800 |
Construction |
$800-$3,000 |
Consulting |
$400-$800 |
Retail |
$500-$1,500 |
Technology |
$800-$1,500 |
Keep in mind, these are average costs and your specific insurance cost may vary.
How to Reduce Commercial General Liability Insurance Cost
Here are some strategies that can help to reduce the cost of commercial general liability insurance:
1. Risk Management: Implementing risk management practices can be effective in reducing insurance costs. This can include regular maintenance of the business premises, employee training, and strict safety policies.
2. Increasing Deductibles: Increasing deductibles can reduce the overall premium cost, as insurers usually reward businesses that share more of the financial risk.
3. Shopping Around: Getting insurance quotes from various insurers can help you compare costs and find the best deal.
Frequently Asked Questions About Commercial General Liability Insurance
1. Is Commercial General Liability Insurance Mandatory?
No, CGL insurance is not mandatory in most states, but it is highly recommended as it helps protect businesses from potential financial loss due to lawsuits and claims.
2. Can I Include Additional Coverage in My CGL Insurance?
Yes, insurers offer additional coverage options that include cyber liability, pollution liability, and employment practices liability. However, adding more coverage can increase the overall insurance cost.
3. Can I Purchase CGL Insurance Online?
Yes, most insurers allow businesses to buy CGL insurance online. However, it is recommended to consult with an insurance professional to ensure you have adequate coverage.
4. What Happens If I Do Not Have CGL Insurance?
If a lawsuit arises and you do not have CGL insurance, your business may be held liable for all the legal fees and settlement costs.
5. What is the Difference between CGL and Professional Liability Insurance?
CGL insurance covers third-party claims related to personal injury, property damage, and bodily injury. Whereas, professional liability insurance covers a business in the event of financial loss due to negligence, errors, or omissions in professional services provided to clients.
In Conclusion
Commercial general liability insurance is a must-have for any business as it protects against third-party claims for bodily injury, property damage, and personal injury caused by your business operations. The overall cost of CGL insurance varies depending on various factors such as industry, business size, and coverage limits.
To reduce your insurance cost, consider strategies like risk management practices and shopping around for insurance quotes. In conclusion, it is essential to get adequate coverage for your business to protect it from potential financial loss due to lawsuits, and CGL insurance is a reliable way to do so.
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