Public liability insurance is the most prevalent type of insurance required by self-employed tradespeople.
As a small business owner, you have likely got a strong focus on keeping your costs low. As such, you’ll want to keep your public liability insurance costs low as well! Here’s how…
In this guide, we’ll look at how your insurance costs are calculated and how you might save money.
What is the cost of public liability insurance?
Unfortunately, the answer to this question is not straightforward. Determining the cost of liability insurance is like asking how much cars cost. A state-of-the-art electric sportscar will not cost the same as an old banger!
The same can be said for public liability. It could be as low as $400 per year for a one-person business owner performing a standard trade, like carpentry, or as high as $1 million per year for a large global corporation.
Even within the trades, there can be significant differences based on the size of your company and its activity.
Generally speaking, the cost for any trades business with a few employees that isn’t doing anything too risky will be between $400 and $4,000 each year.
So, what determines your position within that range?
What factors influence my public liability insurance premiums?
The cost of public liability insurance for a craftsman is influenced by three key factors:
- The quantity of insurance coverage required
- Your profession or trade
- The size of your company
Let us investigate more…
The quantity of insurance coverage required
Let’s start with the simple one: the amount of coverage required. In general, three tiers of insurance are available: $5 million, $10 million, and $20 million.
Some insurers offer $15 million in coverage, while others go up to $20 million, but the idea remains the same: the more coverage you need, the higher the premium.
The good news is that the price doesn’t go up in proportion to the amount of cover. Doubling your coverage from $5 million to $10 million, for example, will not result in a price increase. It will rise, but not nearly to double.
Your profession or trade
Your profession or trade will also have a significant impact on your premium. It’s not so much about your profession as it is about the activities your company engages in.
For example, you may be a carpenter by trade, but your company is a licensed builder who specializes in new construction. In this situation, your insurance premium is based on your occupation as a builder rather than a carpenter.
The cost of your insurance is determined by the risk involved. It’s the same as having auto insurance. You’ll pay a greater premium if you drive a car considered to have a higher risk, such as a turbo or V8. You’ll save money if you drive a basic Camry!
So, if you’re conducting a trade or company activity deemed as low risk, such as ordinary domestic carpentry or electrical, your premium is going to be at the low end of the price scale.
Cost of Public Liability Insurance
However, because welding is considered a higher-risk occupation, the price will be greater.
However, depending on additional conditions, occupations that may have had a lower premium can nonetheless become more expensive.
For example, you could be a low-risk electrician, but if you operate at airports or power plants, you could face a significantly greater claim if something goes wrong. As a result, the insurer will increase the premium.
Even if it means your insurance costs extra, it’s critical to inform your insurer or broker about any of these high-risk activities. The alternative is that they will deny your claim because you failed to inform them of something important, which will be much more costly in the long run!
The size of your company
Finally, the size of your company might significantly affect your insurance premiums.
Some insurers determine the size of your business based on the number of employees you have, while others use your yearly revenue.
In any case, the larger your company is, the more likely the insurers believe there will be a claim, and hence the greater the premium they will have to charge.
Keeping your expenses low
Shopping around for public liability insurance is the most obvious approach to saving money. Better yet, use a reputable insurance broker to look around for you.
However, it’s crucial not to go with the cheapest public liability insurance because it may end up costing you more in the long run.
You are advised to do your research to ensure that the policy is acceptable for your requirements. It’s pointless to save fifty dollars on insurance only to lose fifty thousand dollars when your claim is denied…
A skilled insurance broker can assist you here. They can assist you in finding a policy that not only fulfils your company’s demands but also offers the best value for money.
Keeping your insurance company or broker informed about changes in your firm can also help you save money.
For example, you may have purchased your policy when working on mining sites, but now you’re working on residential projects.
You may be paying for the increased risk that no longer exists because of the pricing difference.
The same may be said for the size of your company. Let your insurer know if your workforce has shrunk or if you foresee decreased revenue this year. You might be able to save some money.
