Commercial general liability coverage is considered the essential and fundamental insurance coverage for businesses. Commercial general liability insurance policy provides vital protection to businesses against a wide range of potential liabilities and risks. Having commercial lines insurance allows businesses to focus on their growth without constantly worrying about unexpected liabilities due to lawsuits or claims. Commercial liability insurance is undoubtedly an essential cost for businesses and the cost is influenced by several factors. Let us understand that in detail.
What is a commercial general liability insurance policy?
A Commercial General Liability Insurance policy is a type of business insurance designed to provide coverage against liability claims arising from bodily injury, property damage, and advertising injury. It is a foundational insurance that every business requires regardless of its size to safeguard itself from various risks that might arise during its operations.
Commercial general liability insurance policy coverage includes:
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Bodily injury and property damage
If a third party suffers bodily injury or their property is damaged due to the business’s operations, CGL insurance helps cover the costs related to medical expenses, repairs, or legal claims.
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Legal defense costs
Commercial general liability insurance policies often cover legal fees, court costs, and settlements or judgments in covered claims or lawsuits, even if the business is not ultimately found liable.
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Personal and advertising injury
This aspect covers non-physical injuries like libel, slander, copyright infringement, or false advertising claims.
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Products and operations coverage
It covers liability arising from products the business manufactures, sells, or distributes, as well as completed operations that could result in property damage or injury after the service is completed.
The specifications of coverage and the cost of a commercial general liability insurance policy can vary based on the policy terms, industry, business size, and other factors. It is essential to understand the policy terms and coverage limits when purchasing CGL insurance. This article let us understand how business size impacts the premium of commercial general liability insurance.
Impact of business size on commercial general liability insurance
Insurance companies consider various elements while deciding on a premium for commercial liability insurance. This includes industry, business size, coverage limits, risk exposure, previous claim history, risk management practices, and more.
Business size has a significant influence on the cost of commercial general liability insurance. Here is how it impacts the cost of insurance:
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Industry and nature of business
The nature of the industry or business and scope of operations can play a vital role in deciding insurance costs. For example, the cost of commercial liability insurance for a manufacturing company might be higher than an IT consulting firm considering the higher risk involved.
Depending on the nature of the business and operations, companies can choose the type of commercial liability insurance- CGL policy occurrence or claims-made policy. The cost can also differ based on the type of policy chosen.
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Limit of Commercial General Liability cover
Larger businesses typically require higher coverage limits to protect themselves against potential large liability claims. Similarly, smaller businesses need relatively lesser coverage limits. The higher the coverage limits, the higher the cost of insurance.
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Exposure to potential risk
Larger businesses often have a higher risk exposure due to larger customer bases, more extensive operations, and higher revenues. This increased exposure to potential liabilities, lawsuits, and claims can result in higher CGL insurance costs.
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Number of employees
The number of employees a business has can also influence the CGL Insurance premium rate. When the number of employees is more (like a larger business), the likelihood of workplace incidents is also higher which can lead to potential claims. Hence, the cost of insurance is typically higher for larger companies.
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Business assets and revenue
Larger businesses typically have more assets to protect and they generate higher revenues. Coverage for larger financial exposures might increase the cost of a commercial general liability insurance policy.
Conclusion
Businesses of all sizes must assess their unique risks, work closely with insurance professionals, and tailor their insurance coverage to adequately protect against potential liabilities. Smaller businesses might enjoy lower CGL insurance premiums compared to larger businesses due to their lesser coverage needs and lesser risk exposure. However, the cost can vary widely based on various factors and policy specifications.
