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Liability Insurance FAQ
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How Much is Liability Insurance?

Many people search the internet each day, asking "how much is liability insurance?" The answer to this question is not universal and cannot be simply stated as a dollar-amount figure that applies to each inquirer. There are many different factors that determine how much liability insurance is. The annual amount is called a premium. This amount is divided up into two yearly payments or 12 equal monthly payments.

The most important factor determining the cost of liability insurance is the nature of the reason. For example, a business that produces hazardous materials is much more likely to face lawsuits from consumers and employees, so their rates are always higher than a company that produces something simpler, such as envelopes. For individuals, coverage considerations must also include what daily risks are faced. An independent caregiver, for example, would likely need a more thorough policy than a stay-at-home mom.

How Much Is Liability Insurance - Averages

Insurance companies that sell liability policies either offer specific kinds of insurance or they assess the risks associated with a business or individual for policy pricing. The more risks there are, the higher the premium amount will be. The underwriting agency also has an important role in determining the price of a premium. Not all underwriters have the same rules.

So, exactly how much is liability insurance? Most general small business policies range between $1,500 and $3,000 per year. Individuals can expect to pay between $500 and $1,000 for a decent policy. Once again, there are many factors that are considered good or bad, which can lower or raise these amounts.

How Much Is Liability Insurance - Prices Vary By State

Liability insurance also varies in price by state of residence. Some states have a much higher percentage of lawsuits and liability claims, which increases the amount of premiums. Most insurers offer policies in every state or multiple states, but in order to determine the state-specific rate, they consult statistics. This is also why rates vary from one year to the next, even if the cost of living remains the same.

Another factor determining the price of a liability policy is the inclusive clauses or supplemental coverages. Some of these are optional because they're not required and may not pertain to some businesses. For example, a small business with one owner doesn't need officers and directors liability. However, a large company that has over 100 officers and directors within the company would be well-advised to add this coverage. For business owners and individuals, these explanations should answer the question of "how much is liability insurance?"

Last Updated: 25 June 2011