Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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It is next to impossible to tell a business exactly how much liability insurance that they need without a specific rundown of their business type, what services they offer and so on. That’s why getting estimates is essential.

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However, you may want to consider purchasing as much liability insurance that you can afford to pay for. There are many factors to consider before making a decision about your liability insurance, however.

Some insurance companies recommend that you purchase at least $1,000,000 as a minimum; however, this simply may not be feasible for you. What’s more, it may not be necessary, as your risk factors may be too low to need such high coverage. Keep reading to learn what to think about when determining just how much coverage you need for your business, what risk factors you need to think about for your business and what type of liability insurance coverage from which you can choose.

How much insurance do you need anyway?

As mentioned above, this is a tricky question, one that requires you to assess your business. Your first consideration needs to be how much exposure you get to actual clients in terms of how often they visit your premises or how often you visit client at their location.

If you have clients constantly visiting your place of business, then there is always a risk that they could have an accident while on your property. When an accident occurs, it doesn’t have to be your fault; your company is still responsible for the medical costs that occur.

If the accident occurs through no fault of your own, for example, your client didn’t tie their shoelaces and they tripped down your stairs, then you cannot be held liable in a lawsuit. If, however, the accident could have been prevented, such as you have a loose carpet and you don’t repair it, and your client trips, then you may have a lawsuit on your hands in addition to the medical costs.

If you visit clients on their premises, you will need to ensure that you have protection in case you are falsely accused of misbehaving, of harming the client while you were in their home or office or for equipment malfunction if you are demonstrating a product or service.

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How does risk impact liability business insurance?

You need to do a risk assessment on these scenarios to determine how much insurance would cover the cost of any of these things happening.

  • Size of property- Another thing that you need to consider when determining how much insurance to buy is the size of your business. The larger your property is, the higher the risk is that someone will get injured on your property.
  • Number of employees- Consider how many employees that you have. The more employees you have, the more insurance you will need because there is a higher risk of one of them becoming injured or creating a situation where your company is targeted in a lawsuit.

Even if your employees never come physically in contact with your clients, if they speak to them by phone, email, or letter, they could potentially do some harm to your business. Imagine if an employee is in a foul mood and tells a customer that they are being a jerk. This small thing could lead to a lawsuit. This scenario may seem silly, but you need protection for any eventuality.

If you enter into a contract with another company or a client and you cannot fulfill that contract or the client doesn’t believe you have fulfilled your contract, then your liability insurance will protect you from that as well.

You may want to consider the largest contract that you have ever signed and start with that number as your base and then add on more liability insurance based on some of the other factors mentioned here.

The bottom line is that you may not be the type of business owner that encounters this type of risk. Perhaps you work for yourself by trading stocks, through FOREX trading and so on. Maybe one day you plan on adding clients but you want to build up your own portfolio first.

You still want to purchase a minimal amount of liability insurance because if someone visits you while you are working and gets hurt, then you are still liable. If you have a business name, then you need liability insurance.

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What risk factors are considered when building a policy?

When it comes to insurance, everything boils down to risk. How high is the risk that you will be sued, that someone will become injured on your property or that someone will get sick after using your product? All of these things will be considered when determining how much your insurance will cost.

It is for this reason that it is very difficult to tell you how much liability insurance you should carry. A construction business, for example, has a huge risk of accident and injury in the workplace and on worksites. This type of business needs to carry far more liability insurance than, for example, a tailor.

If you sell products, especially food products, you risk will be higher than it will be for those that sell services. When you sell products then there is the risk of your product not working correctly, causing an injury or, if it is food, causing an allergic reaction or even food poisoning.

The insurance company will also consider the risk of being sued when writing your policy. An accountant, for example, may be considered high risk because they are responsible for the financial well-being of others. A simple mistake in calculations can lead to devastating results.

Your risks are assessed based on your education, type of services that you offer, how many employees you have, how wide your distribution is and so on.

What type of liability insurance do you need?

A good general liability insurance policy will typically provide you with much of the protection that you need. However, more and more insurance companies are selling different types of services in separate policies. This means that you need to pay close attention to what your general insurance policy covers.

You may see some insurance companies offer employer’s liability, public liability, product liability and professional liability in addition to general liability. The truth is that you could end up paying far more for these al a carte offerings than if you choose a company that offers everything in a single package, which many still do.

You may find that your insurance company offers general liability and product liability separately. This can be great for companies that provide services and not products because you won’t be paying for the risk associated with selling products.

The exception is, however, if you are one of those individuals who are only providing services for yourself. A basic general liability coverage without the other types of coverage included can save you a lot of money on your annual premiums.

Liability insurance can be quite affordable; however, the cost of business insurance will depend on what type of insurance you need and how much you purchase. To save money, you need to start right here with our free quote tool.

Getting a quote ensures that you don’t pay too much for your liability insurance. In addition, you can see what the average price is for liability insurance and you reduce or increase your coverage amount based on your budget and deductible choices and immediately see how it affects your premiums.

You aren’t obligated to purchase anything and our quote tool is free and easy to use. Enter your zip code and compare business insurance quotes today!