How Much General Liability Insurance Do You Need? How do you get the right coverage at the right cost?  Weighing your risks is an important aspect of deciding how much general liability insurance you need.  Consider, first, the impact of an uninsured loss on your company's operations, including payments for bodily injury or property damage to a third party, as well as the associated medical expenses, lawsuits, investigations, settlements, bonds or judgments required during an appeal process.  Is the potential loss you could suffer worth the risk you take by not carrying enough insurance? 

The question of determining the right amount of coverage -- an amount that doesn't leave you vulnerable, yet doesn't leave you paying too much -- begins with knowing your business.  You must start by accurately assessing how likely it is that you or a third party, or the property of a third party, could be hurt in the routine course of your business.  

It is logical to assume that a business with a high-risk environment should carry more liability insurance than a low-risk business.  Likewise, the actual cost of your insurance will be associated with the type of business you operate.  The higher the risk you represent, the more expensive your premiums will be.  Premiums will also depend on the size of your business, measured either by square footage or by payroll. 

Have you considered your business structure?  You may be able to buy insurance with lower limits if your business is incorporated and you're running it as a corporation.  In this case, only the assets of the corporation may be seized in the event of a judgment against your company.  Conversely, you can be held personally responsible and will generally need more liability insurance if you are a sole proprietorship. 

Who works at your company?  Are they, or are you, accident prone?  If your staff is very young or if they are highly trained professionals, this should factor into your liability equation. 

Most states require you purchase at least a minimum amount of liability insurance. An agent or state insurance commissioner can provide you with this amount.  The amount you are required to purchase, however, is usually not enough to adequately protect your business.  In fact, most experts agree that it is probably better to be a little overprotected when it comes to liability insurance.

Cost Considerations

For most companies, $2 million to $3 million of liability insurance is enough to protect you.  The good news is that liability insurance isn?t priced on a dollar-for-dollar basis, so twice the coverage shouldn't be twice the price.

It is often possible to save money by having all of your insurance needs met by one company.  This depends on what coverage you already have and whether or not the provider company offers all the policies you may need, such as property insurance or life insurance.  An agent can investigate this type of information for you.

In addition, you have the ability to reduce your insurance costs by reducing your risks or by instituting certain safety procedures at your company.  Identifying, eliminating and mitigating the risks that you have can help protect you against future losses and can also lower your premiums.

Coverage

General liability insurance tends to have a lot of exclusions.  Be sure you understand exactly what your policy does and doesn't cover.  You may want to purchase additional liability policies to cover specific concerns, such as product liability insurance, auto liability insurance, errors and omissions liability, and directors and officers insurance.


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