The premiums for a general liability policy will be different for each business depending on its level of risk. Several unique factors are used to determine the level of risk your business carries and how much your premiums will be on a monthly, semi-annual, or annual business.
Key Components of Rating Systems
There are several components that are used in general liability rating systems to determine what level of potential risk a business carries during its day-to-day operations. There are several classifications that are grouped by hazards that are common to each industry.
- Classifications
Five-digit codes are used to classify specific industries and their level of risk. Each industry type has several sub-classifications to further define different levels of risk. The declarations page of your business policy will list the five-digit code for your company.
- Rates
Generalized rates are the starting point when it comes to your industry and the risk your individual business carries. The sub-classifications assigned to your business will be used to determine your premium basis.
- Premium Basis
In some industries, the premium basis will be set by the gross sales of a business. Others use a premium basis based primarily on the payroll. The premium basis depends on the classification code and other measurable or easily defined metrics.
- Additional Factors
Insurance carriers will use their own rating system when it comes to determining risk factors. While the formula is primarily the same across the board, it's the specific risk factors related to each business that determines the amount of the premiums.
- Premises and Operations
The size of your building, its location, the number of customers, and the number of hours your business is open will also play a role in determining the cost of your general liability policy. Larger facilities and the potential risk of damage to your customers' personal property will also be factored into the equation.
- Business Size
The size of your business in terms of volume and revenue will also affect your risk classification. The more money your business brings in, the more risk it will carry. Wealthier companies often become targets for fraudulent claims in the hopes of settling for a large payout.
- Experience
Newer companies that have only been in business for a short period of time, may have managers with less experience than companies who have been in business for several years. Companies that have an experienced management team will have a lower risk of claims and lower premiums as well.
- Claims History
A company's claims history is a direct reflection of the level of risk it carries. A large number of claims increases the company's risk and will push its general liability premiums higher. When a company has few claims, its premiums will generally be much lower in the long run.
- Policy Terms
When you purchase your general liability policy, there will be specific terms that are unique to your policy. You can add endorsements for protecting your equipment, valuable papers, or a variety of other types of protection that is unique to your individual business.
Get Personalized Guidance on General Liability Premiums with Us!
If you have inquiries regarding your general liability premiums, Kneller Insurance's agents are here to assist you with the best. We specialize in assessing your company's risk level and accurately calculating the corresponding premium amount. Contact us at Kneller Insurance Agency for personalized guidance in determining your insurance premiums and ensuring comprehensive coverage for your business, you can also contact us at +1 (518) 392-9311.
