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3 Factors Affecting Your General Liability Insurance Rate.

Many business owner’s and managers frequently wonder what goes in to their General Liability Insurance Rate for their small business. Many compare their costs with fellow business owners or friends and family who run other businesses. Depending upon your industry, this may cause some shock when they find out how much more they pay than other businesses in different industries. Every state and every insurance company determines their own way to determine your businesses General Liability Insurance Rate. There is not one set in stone way to determine how much to charge for coverage. There are three main factors that weigh heavily on what you pay for General Liability Coverage: The size, the class code and the loss history of your business.

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The size of your business

For most businesses this is the physical dimensions of your property times a number determined by your classification code. The condition and age of your property mean a lot for this rate as well. Underwriters will examine the age and complexity of the construction. Whether the building is up to code means a lot to the insurer. Generally, newer construction lowers your rate, while older construction tends to raise your businesses General Liability Insurance Rate.

Class Code

General Liability Insurance Class Codes are determined by the activities your business partakes in. In order for this to be accurate, it is important to be honest with your agent about everything your business does and does not do on a daily basis. You can understand the differences in risk from a accounting office compared to a rooking business. Even small differences in a business can have an effect on your class code.

Take for instance commercial versus residential cleaning businesses. Commercial cleaning businesses typically have employees who drive to one location, clean the building and go home. A residential cleaning business typically has employees who are going to more than one residence throughout the day. These employees are driving to and from each residence. While driving between locations, the business is liable for any accidents that occur. This elevates the risk for covering this business and will in turn cost more. This is why it is very important for you to speak long and honestly with your agent in order to be placed in the proper class code.

Loss History

The final factor that impacts your general liability insurance rate is your businesses loss history. This depends upon the industry and the operations of your business. For some industries, it is common to have many small accidents. A restaurant is be a good example of a business that might have a lot of small occurrences. This is because the frequency and amount of customers coming in and out of the restaurant. Slips, trips and falls are common in these industries. If your business tends to have a larger amount or more severe incidents during a recent year, it may cause your rate on premium to go up. Another thing to consider if you have had some claims in the recent past is what type of formal safety program does your business have in place. If you have a well documented safety program in place, your agent may be able to explain some incidents as freak occurrences and not a sign of an underlying problem that makes your business more of a risk.

There are several other factors that go in to what you pay for your General Liability Insurance Rate, but the size of your business, your class code and your loss history are the main factors that determine what you pay. Staying on top of these three factors can go a long way towards preventing your business from paying too much for General Liability Insurance.

General Liability Insurance

General liability insurance protects a company’s assets and pays for obligations. For example, it covers medical costs incurred if someone gets hurt on your property or when there are property damages or injuries caused by you or your employees. Liability insurance also covers the cost of your legal defense and any settlement or award should you be successfully sued. Generally, these include compensatory damages, non-monetary losses suffered by the injured party, and punitive damages. General liability insurance can also protect you against any liability as a tenant if you cause damage to a property that you rent, such as by fire or other covered loss. Finally, it can also cover claims of false or misleading advertising, including libel, slander, and copyright infringement.

Getting liability insurance is a wise investment that doesn’t cost much – annual premiums could range from $425 and up on your line of business and coverage needs. That’s certainly a lot less than the thousands, if not millions, of dollars you may need to spend fighting your case in court. General liability insurance can be purchased on its own, but it can also be included as part of a Business Owner’s Policy (BOP) which bundles liability and property insurance into one policy. If you have a BOP, check it to see what your liability coverage limit is. You may find that it is quite low, in which case you may need additional coverage through a separate policy. There are specific liability products catered to contractors that you can add some tools and equipment coverage making it into a BOP that costs the same if not better than just getting liability coverage by itself. The coverage you need depends on the type of business you are in and the perceived risk associated with it.

How general liability insurance works is the same as many insurance plans, your general liability policy will outline the maximum amount the insurance company will pay against a liability claim. So, if your small business gets sued for $250,000 for medical costs associated with an injury caused by a worksite hazard, plus an additional $100,000 in legal fees, but your coverage maxes out at $300,000, then you are responsible for paying the difference of $50,000. If you are on the higher end of the risk scale and already have general liability insurance, you can also opt for umbrella insurance that increases your coverage limits. This will cover you in situations in which you’re worried that your existing coverage won’t cover all your costs should someone file and win a claim against you. The most commonly asked limit we have found is $1,000,000 per occurrence with a $2,000,000 aggregate.

If an incident occurs that may lead to a claim, you should notify your insurance company or agent immediately. Be prepared to explain what has happened in detail including the time, date, the names of any witnesses, and any other pertinent information.

Remember General Liability Insurance just like all other kinds of insurance are designed to help you in a time of need. Make sure you review your policies with your insurance agent on a regular basis. This can help you make sure you are up to date on coverages and that you have the limits that best suit your business. This is important because your business has probably changed a great deal from the first time you took a policy out when you open your doors.

What is General Liability Insurance?

General Liability (GL) Insurance is the most important insurance coverage a business can obtain. It is frequently referred to as the first line of defense. GL Insurance protects policy holders from third party risks associated with lawsuits and other claims. It can cover things as simple someone slipping and falling when they come in to your building, to a fire in the basement of your property. General Liability is required by law in most states. Businesses are often required to purchase coverage with most contracts for leases, loans, and work performed for others. More importantly, businesses need general liability in order to protect their business and personal assets.

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In most cases a General Liability Insurance Policy is the first line of insurance purchased by a business. It is usually purchased in addition to other policies like Workers’ Compensation, Commercial Auto or Professional Liability Insurance. Most agents can easily package all of these policies in to one Business Owner’s Package (BOP). Purchasing insurance from one carrier in a BOP, is a good way to maximize savings. Dealing with one carriers also makes interactions much easier for business owner’s when they have to get certificates or when there is a need for a claim.

One part of a General Liability Policy that is confusing for many policy holders is, who is a Third Party? Third parties can include anyone from customer’s, to contractor’s, to anyone who may be injured as a result of an action taken by you, your employees or caused by the actions of your business in some manner. It does not protect your employees. That type of injury would be covered under a Workers’ Compensation Policy. In most states Workers’ Compensation is required by law.

Typically a General Liability Insurance Policy provides only specific types of coverage named within that policy. GL coverage is almost always related to third parties who suffer a loss caused by the insured as opposed to employees and the insured’s themselves. Generally speaking, covered losses must be unintentional. Intentional damage is not covered by most liability insurance policies.

Some examples of incidents covered under a General Liability Insurance Policy are:

Personal Injury
Advertising Injury (The unintentional use of a competitors advertising material)
Medical expenses
Legal defense costs
Property Damage (third party property caused by company negligence)
Electronic Data Liability (Businesses that service computers and could cause damage to a server)

One common misconception about General Liability Coverage is that it is all encompassing. There are many instances where an occurrence is not covered by a General Liability Policy and there are other types of insurance offered to fill those gaps. That is where the necessity for a BOP can be crucial. When all coverages are purchased from one carrier there is less risk of there being a gap in coverage. It also speeds up the time for a claim because there are not two insurance companies interacting to determine who is liable for the claim. Most Insurance agents can help a business owner determine any and all coverage your business needs. All businesses should start with a General Liability Policy.

What do I need for a Work Comp and GL Quote?

Items needed to get a quote on Workers’ Comp and General Liability Insurance

Many times while talking to a prospect and gathering information I get the question “why do you need that, I just need a quote”. Agents can usually give you a business owner a phone indication depending on the state you are calling in reference to, but that is only an indication and not a formal quote. Any agent can easily go into detail about why they need an address and Employer Identification Number (EIN). Sometimes the business owner on the other end of the phone does not want to give out the information. At that point an agent has to say, unfortunately I cannot get you a quote unless I have your EIN and other needed information. This is a good piece of information to have if you are looking for a quote on workers’ compensation or general liability insurance for the first time. Below are all the basic questions any agent will ask while on a phone quote. These are also the questions you will get frequently via email when an agent needs more information on a submission sent in to me.

It is very important that we have the correct name and spelling of the company. The way the company is formed is also crucial for Officer & Partner Exclusion Regulations per state.
Phone numbers and email addresses are very important for the agent working on your quote and the future insurance carrier. Many carriers require agents to enter an email address upon quoting and or binding an account. This is typically for billing and information delivery.
Mailing and physical addresses: Many times this is a PO Box for a mailing address and that is acceptable. However, a physical address is needed for the application and auditing purposes. In some cases there are multiple states and different mailing addresses. Your agent will need to know where to mail important policy information. Which address it needs to go to needs to be specified.
Years in business: If you have been in business 5 years but are just now needing work comp or liability insurance our insurance carriers are going to want to know why. If you are a new venture and hiring employees for the first time, agents have different options for you than a business that has been in operation with employees and no workers comp coverage. All of this needs to be known to get an accurate quote.
Federal or Employer Identification Number: This number is very important for many reasons. This number acts as the Social Security Number for your business. This number also acts as a way for each agency or agent to identify they are working on your account specifically. For instance if you call four different agents and they all have the same insurance carrier appointments then it’s first come first serve. Meaning the agent that enters in your information first will have the ability to present the quote. The other agents will be “Blocked” from the market. This EIN will also follow you with the National Council on Compensation Insurance (NCCI). This will show what class codes you have used in the past as well as any past audits out for your company. On a side note please give any and all information to your agent. If an agent asks if you have ever had a Work Comp policy and you say no never, the carrier will have record that you have had a policy before. This makes for a very uncomfortable conversation for all involved.
Officer and owner information: I cannot convey in words how important or vital this piece of information is. Depending on the state and how your company is formed determines what officers/ partners & percentage owned will allow some exclusions. I have seen this go many different ways and usually the head ache could have been detoured with correct owner information.
What are the estimated annual wages for each department (office, field, sales): Workers’ Compensation Rates are based solely on Payroll. Your payroll times the rate of the class of business per 100 in payroll. We as agents understand that if you are just starting out this can be a hard number to decide on. Take it with small numbers first for instance how much money per hour?, how many hours a week?, and how many weeks will the employee be working for you? This number will give you a real number that you can give the agent to quote with.
Detailed description of operations: Agents need to understand what your business is doing on a day-to-day basis. Telling your insurance agent I have a construction business does not give us a lot to go on. What kind of construction? Commercial or residential, new build or existing? Are you an artisan contractor? Or maybe you own a machine shop. What are you machining? All of the questions we are asking are so we can get you the most accurate quote.
If you have a Workers Comp policy in place, agents are going to need a copy of your Loss Runs or Claims history along with an Experience Modification Number (if you qualify for one). You can obtain both of these documents from your current carrier and you do not have to call your agent if you do not want to. Along with this information if needed a supplemental application will be sent to you to be filled out, signed and returned.

Always remember insurance agents are here to help you get the coverage you need. If at any point, do not be afraid to ask questions. Many times this is the first time making a call to inquire about work comp insurance and there is a lot to know before actually purchasing a work comp policy.

Janitorial Business, Liability Needs.

One of the first accounts I ever quoted was for a janitorial cleaning company. This company really stuck out to me. The client called me bright and early one morning looking for a workers compensation quote. It was a commercial cleaning company and when I started the quoting process, I realized there was much more to this risk than I actually thought. I noticed commercial janitorial cleaning was actually a very popular risk to insure, but sadly not many people know how to do it. It is not a difficult risk to write, but some might find all the questions to be rather nerve racking. So allow me to help you out!

If you are thinking about getting workers compensation for your own janitorial cleaning company, you need to first ask yourself these fundamental questions.

1) Will you be doing residential or commercial janitorial cleaning?
* There is a huge difference between commercial cleaning and residential. Commercial consist of any legal business, office, or sometimes contracted apartment cleaning (if the resident has moved out and you are cleaning it for the next resident.) Residential cleaning is basically any home that is occupied by residents.

2) What will you be cleaning?
* It is very important to tell your insurance agent exactly what you will be doing. For example: We will need to know if you are leaning window or gutters. If so, we will need to know how you get to the gutters. What will be the maximum height you will go to, to do the cleaning? If you are moving furniture around.

3) How many employees will be on location?
* Since workers compensation is based off the employees’ payroll, it will be beneficial to tell your agent how many employees you will have at each location.

4) What chemicals will you be using?
* If you are using any type of harsh chemicals to clean with, then you should explain to the agent what the chemicals are and how you will be handling them.

5) What will be the travel exposure between job locations?
* This is a very important question. Your agent will need to know the estimated miles between job locations.

6) What safety program do you have in place?
* This is something you should always have no matter the job. It is critical you have a safety program in place.

These are some of the questions I always ask my clients. It is very critical to know exactly what the janitorial company does.

Now like all other workers compensation quotes, the agent will need to know employee count and payroll for each employee. If you have employees doing jobs other than janitorial cleaning, then you need to explain what those employees will be doing. After you have answered all those questions, then you will be ready to get started on the workers compensation quote.

Now I also want to share a piece of knowledge I learned while quoting janitorial companies. If you are seeking General Liability for your business, then here is a good piece of information that you want to ask your agent. A lot of janitorial businesses are trusted with a key to get into the building. Now if you have a lot of contracts with different locations, then you probably have several keys. Here is the gem I told you about, you need to ask your agent for ‘Lost Key Coverage.” Lost Key Coverage will be an endorsement added to your general liability policy that will pay to replace all the keys you have lost or were stolen. Having the locks replaced for 25 different businesses is very expensive. So if I were you, I would make sure that my general liability policy has lost key coverage or something very similar to it.

**There are also Janitorial Surety Bonds. These bonds will protects the insured’s clients, if one of your employees were to steal from the client. The employee must be convicted before any coverage will be applied.

Claims Made General Liability

Claims made General Liability (GL) Policies cover claims that arise from injury or damage occurring during the policy period and reported to the insurer during the policy period. Claims arising from events outside the policy period or claims reported to the insurer outside the policy period are not covered unless special coverage is purchased or arranged with the insurer. This is done by purchasing a tail for a specified extended reporting period.

Claims Made Vs. Occurrence Insurance Policy

Generally once you have a claims made policy, its best to either keep going on with claims made policies. If you were to switch to an Occurrence Policy, this could leave a potential hole in covering claims if they were to arise. Most of the time a claims made policy will be less expensive at the beginning. If you have to purchase an extended reporting tail these can at times be just as expensive as the original policy themselves.

Here is a quick example of how they work both good and bad:

You own a Convenience Store and you have just finished up mopping the inside. A customer comes in and slips and falls. They get up and seem to be ok. You check on them and they tell you everything is fine so they leave and you think nothing else of it. Your claims made policy expires the next month and you switch to an occurrence policy. All of a sudden, 2 months later you hear from the person that slipped inside your store, and they are claiming a back strain due to the fall. They state that it has effected their work performance, life etc.

Since the claim has now been filed outside of the policy period and you have switched to an occurrence policy, you are now exposed to not having coverage for the claim. If you did not purchase extended reporting period or tail coverage, then, you will potentially not have coverage for the claim. If you decided to purchase the extended reporting period coverage, then you should be fine and the insurance carrier will cover the claim. It’s always important to discuss what type of general liability coverage is best for your company with your agent, not only in the short term but the long term as well.