As with other liability insurance policies, premiums for professional liability coverage depend on the type
of professional service provided and its level of risk.
Claims related to workers’ compensation insurance:
Workers’ compensation insurance protects a business owner from claims by employees who suffer
a work-related injury or illness. Workers’ compensation insurance is required for companies in the
District with one or more employees. Typically, workers’ compensation covers the employee’s
medical expenses, rehabilitation costs and missed wages. Contact the D.C. Department of
Employment Services at 202-671-1000 with your questions about specific workers’ compensation
requirements in the District.
According to the Small Business Administration, business owners, independent contractors, farm
workers and unpaid volunteers are usually exempt from workers’ compensation eligibility.
If this is the first time you’re purchasing workers’ compensation insurance, the rate will depend on
your payroll and your industry. After a few years, your premiums may be based on the actual
experience of your company.
Other types of liability insurance include:
An umbrella liability policy provides extra protection above a standard policy. Umbrella policy
coverage limits are typically within the $1 to $5 million range and are appropriate for business
owners who have large assets or may be especially vulnerable to lawsuits.
Crime Insurance protects businesses from theft and malicious damage, such as employee
embezzlement.
“E–insurance” or Internet Business Insurance covers Web-based businesses for damages caused by
computer hackers and viruses.
Tips and Considerations Concerning Liability Insurance
Liability insurance premiums are typically based on a business’ sales and payroll estimates
provided prior to policy inception. If the actual amounts turn out to be higher after the policy has
been issued, you may need to pay an incremental premium. Conversely, if the amounts are less than
estimated, you could get a refund.
Other factors that influence your liability premiums include your type of business and the risks
generally associated with it. For example, a toy manufacturer may pay $3 per $1,000 of sales. Thus,
on $10 million of sales, the premium would be $30,000. A company that manufactures a less “risky”
product or engages in a less risky business, such as a florist, may pay $1.50 per $1,000 of sales or
$15,000.
Insurance companies evaluate a business’s risk for liability coverage based on numerous factors:
the number of claims filed within an industry or probability of a claim for a similar type of
company; the financial stability and longevity of a business; state laws; business products and/or
operation; and a business’ approach to handling and preventing potential risks.
If you have solid, documented practices and safety procedures in place, you may be considered a lower risk
by an insurance company for liability insurance and therefore be charged lower premiums.
The D.C. Department of Insurance, Securities and Banking, also known as DISB, has two missions: to fairly and
efficiently regulate financial services in order to protect the people of the District of Columbia; and to attract and
retain financial-services businesses to the District. Visit us online at disb.dc.gov. This information is courtesy of the
National Association of Insurance Commissioners Insure U for Small Businesses.