General liability insurance (GL) is a type of insurance that covers you if you are sued for unintentionally injuring someone or their property. Every business should have a general liability insurance policy in place, including small businesses.
However, it can seem like a monumental task to pick an insurance plan for a small or new business because of the potential costs and the business having comparatively fewer resources. Here is what you need to know about the cost structure of general liability insurance for small businesses.

What Does GL Insurance Cost?

The cost of general liability insurance will vary depending on your risk factors and the amount of coverage you need. Most companies start with a basic plan and upgrade it over time as the business grows. There is no defined cost because every business has different risk factors. However, there are affordable plans for every size of business out there.

Why You Should Have GL Insurance

There are many reasons why you should have GL insurance. First, it protects your business against lawsuits related to product defects or other accidents that may cause harm to third parties. If one of your customers gets sick from consuming one of your products, or if a faulty product injures someone, the person may decide to sue you.
If any of these circumstances occur, having general liability insurance will help you cover the costs of any settlements or court fees. If someone is injured on your property or due to an act committed by one of your employees, you may also be held accountable. For example, let’s say an employee injures a customer in a retail shop. The customer could sue both the employee and the shop owner for medical expenses and any pain and suffering. General liability insurance protects you in these situations by paying for legal defense costs, settlements, and any awards made against you by a judge or jury.

Coverage and Costs

While the amount of coverage you need will vary based on your industry and the types of activities you engage in, a good rule of thumb is to get enough coverage to cover about three years’ worth of losses.
That should include enough to cover the cost of defense in any claims and any payouts you’ll need to make. Most insurance agents will help you determine how much coverage you need.

Premiums

The premiums you pay for general liability coverage will depend on a number of factors, including your company’s overall risk, the amount of coverage you need, and your personal factors, such as your age and your credit score.
In general, though, getting a quote for GL coverage is not too difficult. Many insurers let you get a quote online, and you may be able to lock in a rate that’s good for a certain period of time.
Make sure that you look at your earnings estimates before accepting a policy. This lets you see if you are likely to afford that premium throughout the contract period, which is usually one year.

Deductibles

You may be able to lower your GL premiums by selecting a higher deductible. A deductible is the amount of money you must pay for a claim before your insurer steps in to cover the rest. A high deductible can lower your premiums, but keep in mind that you’ll have to pay for most claims from start to finish.
A low deductible means that your insurer will usually step in to cover most claims, but you’ll be responsible for a higher percentage of the cost. A low-deductible policy is great for large claims, but it’s not a good idea if you have a lot of small claims.

Limits

Most states require you to carry at least $1 million in general liability coverage, but many insurers recommend a higher amount. If you’re in a high-risk industry, like a construction business, you may need even more coverage.
About 30% of businesses are underinsured. If you’ve estimated your coverage requirements, but you’re still under that amount, you can supplement your coverage. This is often referred to as “excess coverage” or a “retrofitting endorsement.” You can also increase your coverage at any time by raising the amount of your policy.

Exclusions

Certain types of businesses may be excluded from general liability coverage. For example, insurance companies may not cover activities such as piloting airplanes, performing surgery, or running a nuclear power plant.
If you run a business that falls into one of these categories, you’ll likely need a specialized policy — and the rates for this coverage will be much higher.
You’ll also have a harder time getting coverage if you have a poor credit history, have been sued for negligence in the past, or have employees that have committed certain types of crimes in the past five years.

Finding the Right Insurance Plan

Finding the right insurance plan for your company can feel intimidating, but it doesn’t have to be. The key is balancing costs with coverage and having help from the right insurance provider.
When you’re just starting out, it’s easy to put off buying insurance. After all, you don’t have any income yet to put towards premiums. However, general liability insurance is necessary for most businesses of any size. It’s also inexpensive to get started — and necessary to protect your financial future.
If something goes wrong in your business, general liability insurance will help cover the costs associated with medical bills, legal fees, and damages to property. Without it, you could be in for a lot of financial trouble — and it could even force you to shut down your company.

Millers Insurance Group provides a variety of cannabis insurance options. Please reach out to us or fill out our online form to get an insurance quote today for your company’s insurance needs.