It is difficult to recommend a specific dollar amount for how much general liability insurance any individual business should carry. Every business is different. A business that's all-online might require cyber liability insurance, but relatively little in the way of general liability. A business of the same size, selling similar products, but in a brick-and-mortar store might require far more general liability insurance, but relatively little cyber liability insurance. There are small businesses that require more general liability insurance than medium-sized businesses. No two businesses — even of the same size and in the same industry — share exactly the same risks.
A minimum recommended policy for a small business would be around $1 million, which would average around $300 to $1,000 a year. A $2 million policy averages around $500 to $1,300 a year. You'll notice that's a $700 to $800 margin for the same policies. Your liability policy will be priced based on the likelihood of an incident. In fact, it's cheaper for a low-risk business to buy another million in coverage than it would for them to pivot into a high-risk industry.
The price you'll pay on your premiums is determined by the likelihood of an incident. The amount of insurance you're going to be buying should be determined by how expensive that incident is likely to be. Several factors weigh into this, such as:
- Where are you located?
- How many people work for you?
- What industry do you work in?
- What is your business worth?
- Do you have directors and officers to worry about?
- Who are you selling to?
You are not required to carry any general liability insurance at all, at least not by law. Your partners, lenders or investors may require it. But if they don't, this means that there is no minimum that you are required to buy. For most small businesses, a $1 million policy should be enough to cover any legal fees and damages that need to be paid. You can upgrade from there as you expand your business. But keep in mind that there are exceptions. So, it’s always worth talking to your agent and seeing what they recommend.
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