What are the biggest factors that impact your liability insurance premium?

March 13, 2023

What are the biggest factors that impact your liability insurance premium?

Business owners and finance teams are always looking for ways to save money on liability insurance premiums. However, lowering your premium can be difficult if you don't understand the factors that impact your rates. In this blog post, we'll take a look at some of the biggest factors that affect liability insurance premiums. With this knowledge, you'll be in a better position to negotiate with insurers and get the best possible rates for your business.

The type of business you have - businesses that are considered high risk will pay more for liability insurance

If you own and operate a business, liability insurance is essential for protecting your organization from financial loss. In Canada, liability insurance policies vary in cost depending on the type and size of the business. For businesses that are deemed to be higher risk, liability insurance premiums will typically be more expensive to compensate for the increased risk associated with the activity. Businesses that fall into this category include organizations conducting activities with hazardous materials or those linked to litigation or liability claims. For example, nightclubs and bars are considered a higher-risk business for liability claims when compared to many other industries. It's important to ensure your liability insurance policy adequately covers all aspects of running a business as it can provide a critical backstop in the event of accidents or unexpected liability issues.

The revenue your business generates - larger businesses will generally pay more for liability insurance

The revenue of a business can have a big impact on the amount of liability insurance it needs to purchase in Canada. Usually, larger businesses will be more likely to pay higher premiums for liability insurance, as they typically have many more customers, and potentially much more sophisticated customers who are more likely to take action against them. Think of it this way - which business would have more trip and fall risk, a retail store that has 25 customers visiting their store per day, or one with 500 per day? All this being said, your specific industry and type of business will factor into how heavily revenues are affecting your liability premium. Ultimately, deciding the right liability insurance policies for the size of your business is an important part of managing your business insurance risk successfully in Canada.

Your claims history - if you have had previous claims, your business insurance premium will be higher

It's important to remember that insurance providers always view claims history when setting premium rates. This means that if your business has had previous instances of making a claim - regardless of the amount or reason – then you will often (but not always) have to pay a higher premium than businesses without such a history. This highlights the importance of maintaining an accident-free environment, and being ready to tackle any potential issues as they arise. From an insurance company's perspective, a business that has had one major claim in the last 5 years is generally a more attractive risk (and given the benefit of the doubt) than a business who have made numerous small claims. While the one major claim might be significantly more loss than several smaller ones, insurers can often view frequency more negatively than severity, as these claims are often within the businesses control. By ensuring your workplace is safe and taking measures to mitigate any potential risks before they become an issue, you may be able to save both time and money in future.

The amount of coverage you need - the more coverage you need, the higher your business insurance premium will be

When it comes to calculating your business insurance premium, one of the main factors to consider is the amount of coverage you need. Generally speaking, the higher the amount of coverage required, the more expensive your policy will be. This is because a larger limit of insurance creates more risk of a catastrophic loss for the insurer, and broader coverages open up a wider range of potential risks and losses. It is wise to take time to carefully assess how much risk your business faces so that you can make an informed decision about the ideal level of coverage to get. Opting for too little coverage could result in unforeseen financial losses if something unexpected were to occur; however, paying for insurance you don't need can also be a costly mistake as it would eat into businesses’ profits unnecessarily.


There are a few key factors that impact how much your business will pay for liability insurance. The type of business you have, the size of your company, and your industry can all play a role in how much you'll end up paying for coverage. Additionally, your claims history will be taken into account - if you've had previous claims, you can expect to see a higher premium. Finally, the amount of coverage you need will also affect how much you pay for insurance. If you're not sure if the premium you're paying is fair, reach out to us and we'd be happy to give you our opinion (completely free).

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