How Businesses are Classified for GL Insurance
General liability classification codes assigned to your business will have a tremendous impact on your liability insurance rates and premium. Insurance companies will assign your class codes based on your industry and the type of work performed by your business. The rates developed for your business classification are applied to your gross sales, square footage, or payroll as a rate per $1,000, depending on your industry. Liability insurance rating is based on gross sales for most businesses except for construction, where it is often based on both employee payroll and sub-contractor payments.
There is no standard rating system with general liability insurance. Insurance companies will either develop their own classification system or base their rates off of existing business classifications. The most common authorities for GL rating system include:
• NAICS: North American Industry Classification System
• ISO: Insurance Services Office
• SIC: Standard Industrial Classifications
• NCCI: National Council on Compensation Insurance
It’s important that a business is properly classified by their insurance company because of policy exclusions. GL classifications are based on assumptions that common business risk will encounter work that is typical to their profession. If you engage in business activity outside of your classification their is a chance that your business would not be covered under your GL policy. This is because the policy agreement will exclude coverage for unrelated work. A business can be assigned to multiple GL class codes to allow for unique business operations. For example, a trim carpenter who also does floor installation should be rated with both classifications designated on their insurance policy.
Why Insurance Rates Vary by Industry
The easiest answer is because the risk of claims vary widely from one industry to the next. General liability insurance rates are based on tons of empirical data at a national, regional, and state level. Insurance companies use this data along with their own internal performance data when determining their insurance rates for each of the liability class codes within their appetite. Some of the primary rating factors include a) the frequency of GL claims per industry, b) the severity of claims, c) the cost of claims, and d) the regulatory (state laws) environment of each state.
|Risk Varies From Business to Business|
Insurance companies often use the term hazard to separate types of risks from one business to the next. The hazards faced by a home health care provider are different than those faced by a bar owner. For example, if a patient falls and sustains bodily injury while being assisted in their home a home health care provider may be liable for the injuries. If your a bar owner, however, your greatest risk revolves around injuries or damage associated with alcohol consumption (i.e. liquor liability).
Contractors and General Liability Insurance
Construction general liability is extremely diverse and has its own set of unique challenges. There are almost as many GL classification codes for contractors as there are for all other types of businesses combined. Part of the reason for this is that there are so many separate types of construction related businesses. Handyman Services, Masonry Contractors, Electrical Contractors, HVAC Installers, Home Inspectors, and Janitorial Services to name a few.
The quality of coverage and the type of policies offered to these classes of business vary considerably for contractors. Many contractors end up with a claims made policy as opposed to an occurrence policy without being fully informed of the differences by their insurance agent. Additionally, insurance carriers’ contractual language within the policy significantly effect the actual liability coverage available to the insured.
How to Buy General Liability Insurance at the Lowest Rates
The quick and affective answer to buying the most affordable general liability insurance is to shop your insurance coverage with more insurance carriers. Many small insurance agencies only represent a couple of insurance companies within their given market. The primary reason they don’t have access to more markets is rooted in the amount of new premium they can produce per carrier each year. The unfortunate truth is insurance companies want new business production and, therefore, they will only appoint agencies that can meet their minimum productions requirements.
General Liability Shop.com is a national insurance agency, representing over 35 commercial insurance companies. We specialize in business insurance and are able to meet production requirements with a wide range of diverse insurance companies. We shop your general liability insurance with all of our applicable carrier to ensure you get the lowest GL rates possible for your business. When insurance companies compete for your business insurance, you win.
Classifying my Business for General Liability Insurance
Since every insurance company is unique with regard to classifying general liability insurance, your best bet is to understand what classification(s) they are using to rate your business insurance. As the policy holder, you have every right to question your class codes with your agent and your insurance carrier until you understand and agree your class codes are accurate. Keep in mind that your class code is important both in terms of price and with regard to included coverage.
Our general liability and small business Specialists can help guarantee your class codes are accurate.
Finding the Best Price for GL Coverage
Let our business Specialists help you shop general liability insurance and more. Start your liability insurance quote online here at General Liability Shop.com or give our agents a call at (800) 900-8657.