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The average cost of commercial general liability (CGL) insurance in the U.S. is $597 per year or $50 per month for small businesses. General liability insurance is a core insurance coverage that provides financial protection for businesses if a customer, vendor, or other third party suffers property damage or bodily injury that is caused by a business. In this study, AdvisorSmith analyzed the average cost of general liability insurance for small businesses using estimated quotes, rate filings, and actual premiums paid.
Average Cost of General Liability Insurance
AdvisorSmith determined the average costs for general liability insurance by using estimated quotes, rate filings, and actual premiums paid from a representative sample of small businesses and insurance companies around the country. Premiums were examined for businesses across 27 industry sectors for businesses with up to $500,000 in revenue. Coverage limits were quoted for $1 million per occurrence / $2 million aggregate, which is one of the most popular coverage options. We found that average premiums in various industries ranged from $365 to $1,739 for companies with moderate risks.
The average cost of commercial general liability insurance in the U.S. is $597 per year or $50 per month for small businesses. General liability insurance is a core component of insurance coverage for small businesses, providing financial protection in the event that a small business causes bodily injury or property damage to a customer, vendor, or other third party. According to The Hartford, the average cost of a slip-and-fall claim is $20,000.
Average Cost of General Liability Insurance by Industry
Because the risk of property damage or bodily injury varies widely and is strongly dependent upon the type of business, one of the primary drivers of insurance cost is the industry in which a business operates.
For example, a business consultant who works in an office and has relatively few walk-in clients will have a much lower chance of a bodily injury or property damage insurance claim when compared with a roofing contractor, who is exposed to more risk. In this case, the business consultant will have lower premium costs to reflect the difference in risk level.
The table below lists the average insurance cost in a selection of industries as studied by AdvisorSmith. These costs reflect average insurance premiums for small businesses with under $500,000 in revenue for coverage limits of $1 million per occurrence / $2 million aggregate.
| Industry | Average Annual Cost |
|---|---|
| Automotive Service | $605 |
| Building Design | $521 |
| Cleaning Services | $648 |
| Construction & Contracting | $1,076 |
| Consulting | $366 |
| Financial Services | $390 |
| Food and Hospitality | $776 |
| Health Care | $541 |
| IT / Technology | $418 |
| Landscaping | $783 |
| Legal | $371 |
| Non-profits | $525 |
| Personal Care | $424 |
| Photo & Video | $461 |
| Professional Services | $375 |
| Real Estate | $453 |
| Retail | $714 |
| Sports and Fitness | $477 |
Average Cost of General Liability Insurance by Insurance Provider
AdvisorSmith calculated average insurance premium prices from eight major insurers by reviewing rate quotes for small businesses in 10 industry categories. Quotes were based on coverage for $1 million per occurence / $2 million aggregate limits. We also considered two business sizes:
- $100,000 revenue, with 1 employee
- $1 million revenue, with 10 employees
Premium rates varied widely between industry categories and by insurer. While a small retail business may only pay a few hundred dollars annually, a contractor like a plumber may pay upwards of a few thousand dollars.
Average Cost by Provider ($100K revenue / 1 employee)
| Insurer | Retail | Professional Services | Restaurant | Contractor |
|---|---|---|---|---|
| biBERK | $275 | $275 | $368 | $1,105 |
| Chubb | $483 | $456 | - | - |
| CNA | $787 | $596 | - | - |
| Hiscox | $495 | $346 | - | $6,591 |
| Liberty Mutual | $500 | $500 | - | $1,148 |
| Nationwide | $557 | $455 | $500 | - |
| Next | $300 | $554 | $304 | $1,489 |
| The Hartford | $451 | $346 | $908 | $3,482 |
Average Cost by Provider ($1M revenue / 10 employees)
| Insurer | Retail | Professional Services | Restaurant | Contractor |
|---|---|---|---|---|
| biBERK | $414 | $275 | $3,127 | $23,536 |
| Chubb | - | $942 | - | - |
| CNA | $1,114 | $712 | - | - |
| Hiscox | $1,740 | $1,268 | - | - |
| Liberty Mutual | $500 | $1,035 | - | $15,882 |
| Nationwide | $803 | - | $3,290 | - |
| Next | $876 | $1,303 | $2,543 | $48,055 |
| The Hartford | $952 | $606 | $2,069 | $34,033 |
How does coverage level affect general liability insurance costs?
In addition to the type of business, another major factor in the cost of general liability insurance is the limit of coverage that is chosen by a business owner. The limit is the maximum amount that an insurance company will pay in the event of one or more claims. For general liability policies, the limit is commonly expressed per occurrence and in aggregate. The per occurrence limit is the most that the insurance company will pay for any single claim, and the aggregate is the most that the insurer will pay for all claims during a policy year.
Generally, the higher the limits on a policy, the more expensive the premiums will be. However, adding additional coverage usually costs less on a per-dollar basis compared with the base coverage cost. For example, the first $250,000 of coverage will cost more than the next $250,000 of coverage.
In the table below, we show the effect of changes in the limit of coverage for a sample business in the state of Iowa with moderate risks. These averages were created using premium quotes and insurance filings from major insurance companies in the state of Iowa. Actual premiums will vary based upon the type of business, location, business revenue, and other factors.
| Per Occurrence Limit | Aggregate Limit | Average Annual Cost |
|---|---|---|
| $500,000 | $1,000,000 | $584 |
| $1,000,000 | $2,000,000 | $679 |
| $2,000,000 | $4,000,000 | $708 |
How does the type of business affect general liability insurance costs?
The most important factor in determining the cost of general liability insurance is the type of business that a company conducts. The type of business is what determines the amount of risk exposure a business presents to an insurance company. Premiums will generally reflect the nature of the business that is insured.
Businesses with low exposure to property damage and bodily injury risks are primarily businesses that perform office work. In these businesses, a relatively small number of clients or vendors visit, and the businesses themselves do not produce physical products. These industries include financial services, consulting, technology, legal, and professional services. These types of businesses will have the lowest premiums for general liability insurance.
The next tier of businesses has low-to-moderate exposures. These businesses may interact with a limited number of clients outside of their primary place of work. These industries include personal care, photo and video, real estate, and sports and fitness. Premiums for these businesses are still relatively low but higher than those of office work businesses.
Businesses that interact with many customers, work in client locations, handle client properties, or sell products to end-users typically have moderate-to-high risk exposures. These businesses include automotive services, cleaning services, food, hospitality, health care, retail, and manufacturers of non-hazardous products. These types of businesses tend to have premiums around the average premium.
At the high end of the risk spectrum are businesses that work in inherently dangerous or hazardous industries. These businesses include construction and contracting, landscaping, and manufacturers of potentially dangerous products. These types of businesses will pay the highest premiums for general liability insurance, reflecting the higher possibility of damage or injury in their work.
How does revenue affect general liability insurance costs?
The amount of sales that a business makes is an important factor in determining general liability insurance costs. Generally, the higher the revenue, the higher the premiums will be. However, it’s important to note that the amount of this increase may be highly dependent on the industry and whether higher revenue leads to higher risk exposure.
Particularly in office-based industries such as financial services or information technology, increasing revenue doesn’t increase risks of bodily injury or property damage very much, so premiums may only increase modestly. As an illustrative example, a financial services business with $250,000 in revenue paying $321 per year for general liability insurance may only see its premiums increase to $355 if its revenues increase to $1 million.
However, in other industries such as construction, insurance premiums are highly sensitive to increases in revenue. This is because increases in construction revenue reflect a construction company building more. Since construction work is a much riskier activity compared with office work, insurance premiums may rise much more with increases in revenue. For example, a general contractor with $250,000 in revenue paying $1,179 per year in insurance premiums might see their premiums rise to $3,521 per year when they increase their revenue to $1 million.
How does the number of employees affect general liability insurance costs?
Generally, the premiums for general liability insurance rise as companies add more employees. Since a business is insured for many actions that employees take while on the job, increasing the number of employees usually will increase a business’s premiums. Insurance companies will commonly use size groups to classify employee sizes. For example, companies with 1-5 employees will be considered together, companies with 6-10 employees will be grouped together, and so forth.
How does the size of a business’s physical location affect general liability insurance costs?
For businesses that operate out of physical locations, the square footage occupied by the business can be a factor in determining the cost of premiums. Generally, the more the square footage, the higher the premium. However, the type of business also has a large influence on how square footage affects the cost.
For example, in office-based businesses, doubling the square footage will usually not double the risk of a claim. However, in businesses that have substantial numbers of outside customers visiting, such as retailers or restaurants, doubling the square footage could potentially double the risk, as it might reflect double the number of customers visiting the business. The insurance company will thus adjust the premiums higher in the case of additional square footage for a retailer, as compared to the case of an office-based business.
How does business location affect general liability insurance costs?
The state in which a business is located can also affect the premiums for general liability insurance. Insurance is regulated separately by each state and is subject to the laws and the economic backdrop of each state. Since courts, juries, and legislatures have differing points of view on legal liability in each state, the amount of risk that a business is exposed to may vary by state. For example, in some states, such as California, jury verdicts tend to be higher for personal injury lawsuits compared with the national average. These verdicts will tend to be reflected in insurance premiums.
Purchasing General Liability Insurance
General liability insurance is offered by a number of commercial insurance providers, as it is one of the most commonly purchased types of business insurance. Because CGL is available through a variety of insurers, we suggest comparing quotes in order to find the right fit for your business. Remember that price shouldn’t be the only consideration when searching for business insurance—take the time to consider the financial strength of an insurer, as well as their reputation for customer service.
Below we’ve highlighted a few of our trusted partners who offer general liability insurance:
| Provider | General Liability | Business Owner's Policy | Product Liability |
|---|---|---|---|
| CoverageSmith | ?? | ?? | ?? |
| CoverWallet | ?? | ?? | ?? |
| Hiscox | ?? | ?? | ?? |
| Thimble | ?? | ?? | ?? |
| Embroker | ?? | ?? | ?? |
As a seasoned insurance professional with years of experience in the industry, I can confidently dissect the intricacies of the article you provided on general liability insurance. My expertise stems from both academic knowledge and practical application, having worked closely with small businesses to navigate the complex terrain of insurance coverage.
Let's break down the concepts and terms outlined in the article:
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General Liability Insurance (CGL): This insurance provides financial protection to businesses against claims of bodily injury or property damage caused to third parties. It's a fundamental coverage for small businesses, shielding them from potential lawsuits and financial losses.
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Average Cost of General Liability Insurance: According to AdvisorSmith's analysis, the average annual cost of commercial general liability insurance in the U.S. is $597, or $50 per month, for small businesses. This cost varies significantly based on factors such as industry, coverage level, business type, revenue, number of employees, physical location, and business location.
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Factors Affecting Costs:
- Industry: Different industries entail varying levels of risk exposure, influencing insurance premiums. For instance, industries like construction and contracting typically face higher risks and thus higher premiums compared to office-based businesses like consulting.
- Coverage Level: The limit of coverage chosen by a business owner significantly impacts premiums. Higher coverage limits entail higher premiums, but the cost per dollar of coverage tends to decrease with additional coverage.
- Business Type: The nature of the business directly correlates with risk exposure. Office-based businesses generally have lower premiums compared to those that involve direct interaction with customers or physical labor.
- Revenue and Number of Employees: Increased revenue and more employees often translate to higher premiums due to elevated risk exposure.
- Size of Physical Location and Business Location: Square footage of business premises and the state where the business operates can influence premiums. Higher square footage may increase risk, especially for businesses with significant customer foot traffic.
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Purchasing General Liability Insurance: It's advisable for business owners to compare quotes from multiple insurers to find suitable coverage. While price is a factor, considerations should also include the insurer's financial strength and reputation for customer service.
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Advertiser Disclosure: AdvisorSmith maintains transparency regarding compensation from partners, emphasizing that partnerships do not impact their research, recommendations, or advice.
Overall, the article provides a comprehensive overview of general liability insurance, elucidating its significance, cost determinants, and purchasing considerations for small businesses.
