Commercial General Liability Coverage Calculator

Commercial General Liability Coverage Calculator

Calculating your commercial general liability coverage isn't a walk in the park. It's not just about throwing numbers together; it’s about understanding your business's unique risks. Too many people ignore the fine print, leading to underinsurance or paying too much. You wouldn’t drive without knowing your car’s value, so why risk your business?

How to Use This Calculator

Stop wasting time on guesswork. First, gather your financial statements and previous insurance policies. You need to know your total revenue, the number of employees, and any past claims you've made. If you’ve never filed a claim, that’s great, but don’t let it lull you into a false sense of security. Know your risk profile.

The Formula

The formula we use here factors in your business size, revenue, and risks. It’s a simple yet effective calculation: Total Revenue x Risk Factor = Required Coverage.

Variables Explained

Let’s get into the nitty-gritty. The inputs you'll work with are crucial:

• Total Revenue: Not just what you think you’ll earn. Get the last year’s total revenue from your financial statements. This is the foundation of your coverage calculation.
• Number of Employees: More employees can mean more risk. Each employee adds to potential liability. If you’re a small business, this can be a big number.
• Risk Factor: This isn’t just a number pulled from thin air. It’s a percentage based on your industry and historical claims data. Look up your industry’s average claims to find a realistic risk factor.

Case Study

For example, a client in Texas, a small construction firm, came to me confused about their coverage. They thought their revenue of $500,000 meant they only needed $1 million in coverage, but after analyzing their claims history and employee count, we found they needed at least $2 million. They were shocked but relieved to know they weren't underinsured against potential lawsuits.

The Math

Here’s the breakdown: if your total revenue is $500,000 and your risk factor is 0.04 (or 4%), you’d need $20,000 in coverage—simple math. But the devil's in the details, and that’s where many get it wrong.

💡 Industry Pro Tip

Most insurance agents won’t tell you this, but always negotiate your premiums. If you have a clean history, you can often get better rates. Also, consider bundling policies to save some cash. It’s not just about the coverage; it’s about getting the best price for it.

FAQ

What is commercial general liability coverage? It protects businesses from financial loss due to claims of injury, damage, or negligence.

How often should I review my coverage? Annually, or anytime there’s a significant change in your business.

Can I calculate this myself? Yes, but be wary of underestimating your risks. It’s better to consult an expert.

What happens if I don’t have enough coverage? You could be liable for damages beyond your coverage limit, putting your business at serious risk.