Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Sep 20, 2021

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If you’re reading this, you may be new to the small business world.

Or perhaps you’ve been in business a few years with no insurance and have been asked for a certificate of insurance in order to bid on a job.

Regardless of whether you’re a sole proprietor or a small commercial start-up, you’ll probably want to have a commercial general liability insurance policy in place.

(Why you need commercial general liability.)

First things first, you’ll want to “get in” with a standard lines carrier to avoid paying higher insurance premiums and having to pay in full or opt for premium financing as a result of insuring with a surplus lines carrier who does not offer direct billing.

Either way, there is no way to tell you what your CGL annual premium will be since there are so many varying factors, but we can certainly give you some guidelines of what you can expect. It won’t cost millions of dollars, but it’ll certainly be worth looking into to better understand what it will end up costing.

Please note the premiums can vary widely by carrier and your best bet is to contact a local independent insurance agent who represents multiple companies to see which one is comfortable with your exact type of business model, and offers the cheapest insurance. Your average premium could be much different than another business model, so it’s best to cover your bases and not go off what others pay.

That said, let’s look at your overall type of business and the length of time you’ve been in business. Plus, your personal credit score or business credit rating will also be necessary in determining the cost of coverage.

These are the factors that determine which type of insurer will accept you as a risk and how much they may intend to charge you for commercial general liability insurance.

And don’t forget about commercial general liability limits.

What if you’re in the ‘paper’ industry? 

If you are a paper based business, that just means that your business activities don’t end up with a physical result. Think insurance agent, real estate agent or any other middle man type business that doesn’t have a product, but rather one that offers a service, you’ll get off the hook relatively easy here.

It’s not often necessary to have been in business for any amount of time (start-ups are typically okay) if this is your business model. You won’t usually have to worry about anything other than basic policies.

There is very little risk in the way of commercial general liability in these types of companies. Most of the danger is in errors & omissions coverage, which is a different policy altogether. The average cost for a policy like that is going to be much higher.

You can expect a premium, often the minimum premium the insurer will offer, of about $500 for 12 months. Remember, credit plays a role here. The worse your credit history, the higher the premium you can expect to pay. If you don’t Or worse, you could be deemed an unacceptable risk.

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What about contractors? 

Contractors are a tricky insurance proposition for insurers. The old, “cancel the policy after the bid is accepted” trick has led to very tight insurance guidelines, which means a higher policy cost for everyone. It does nothing but waste time and cost insurers and agents money, not to mention it’s known industry-wide. We’re not the old lady next door with a leaky faucet!

Here’s the deal for contractors. If you don’t have at least three years in business, with continuous insurance, get ready to cough up over $1,200 per year and finance the premium if not paid in full.

If your contracting includes roofing, try $1,800 to over $2,000 per year. Roofing is normally excluded from contractor policies. You really want to try to pick a specific class for your trade rather than get stuck with the handyman title, as that will cost you a little more as well. However, if that’s the route you’re looking to take, any company will be able to offer you an online quote, and you’ll be able to find an affordable standard policy.

What about manufacturers?

If you are in business to produce an actual product, you can expect to pay more for your commercial liability insurance.

This is where there is an actual exposure for products and completed operations losses, i.e. something you manufacture fails and causes bodily injury or property damage.

This is more risky for the insurers, so you’re going to be paying more, point blank. Expect to pay slightly over $1,000 per year with a small outfit.

FYI: If you’re starting a large scale manufacturing company, this post is not for you. It would probably be in your best interest to sit down with an insurance agent to discuss your coverage.

Again, these are basic guidelines – actual insurance rates may vary widely by your business location, type of business and credit history. You’ll have to do some research, but you’ll be able to find various types of coverages out there, and a monthly cost that you’ll be able to afford. Protecting your business is just as important as having the business itself!