In these litigious times, virtually every business is potentially liable for damages related to personal injury, workplace misconduct or a natural (or man-made) disaster.

Fortunately, the business liability insurance cost to your enterprise doesn't have to be through the roof. Annual premiums are generally inexpensive, particularly when measured against the potential loss of battling against litigation in court. Additionally, the peace of mind that comes with knowing you've done all you can to protect your business — and the employees who help make it a success — is priceless.

So, what does an insurer look at when considering offering you liability insurance coverage? As the Small Business Administration notes, "the coverage you need depends on the type of business you are in and the perceived risk associated with it."

Key Areas of Concern for Insurers

Where your business is located. If the physical location of your business is in a region that's susceptible to natural disasters of some sort (flooding, wildfires, hurricanes, earthquakes, etc.), the potential for catastrophic damage is naturally greater. Because of this, premiums will likely be higher.
The physical size of your business. Insurance rates can vary depending on the size of your office building and the amount of property owned by the business, as well as applicable land and local regulations.

The condition of your physical location. Is your office or building in good condition, or in need of repairs? A business that fails to take fundamental precautions against weather- or environment-related damages won't be quite so attractive in the eyes of an insurer. A business that's done everything possible to minimize potential risks of physical damage may be more appealing to insurance providers.

In addition, insurers scrutinize the quality of the workplace itself. They will keep an eye out for any toxic materials or repairs (or lack thereof) that might, for example, increase the likelihood of an electrical fire or some other preventable accident.

"To lower your premium or costs, you may consider switching your locations, fixing up your property or outsourcing any risky tasks to another company," advises StartUpNation.

The amount of sales. It may seem counterintuitive, but the more successful a business, the greater its liability — if only because more customers (and, generally speaking, more employees) are involved. Perceived risk tends to increase under these circumstances.

The safety of your workforce. Premiums can vary depending on the type of work your employees perform. Workers on a construction site typically face greater physical threats than an accountant. Of course, every employee's physical safety must be a top priority at all times. It's simply that insurers assess the potential for harm based on what kind of work is being done and under what conditions.

Additional liability factors can include:

• The type of machinery your business requires
• The working condition and/or age of your equipment
• If your business is situated in a state that frequently awards higher damages to plaintiffs claiming personal injury

What You Can Do

Generally speaking, the less perceived risk an insurer sees, the lower your liability insurance premiums could be. Therefore, you should pay close attention to the following areas:
Promote employee safety. Take every conceivable measure to minimize the occurrence of job-related accidents. This includes providing the right tools and protective gear for every employee, as well as offering regular safety education and awareness training courses.

Encourage manager oversight. Your managers need to ensure employees do their jobs as prescribed by your company policies — and that no one takes undue risks of any kind.

Get rid of outdated or unsafe equipment. Regular equipment maintenance and upgrades reduce the chance of accidents and contribute to a safer work environment.

Screen all new hires. Don't make foolish (or uninformed) choices about the people you hire. Your risk increases when you employ individuals who falsify their credentials or experience.

Reducing your business liability insurance cost can be a complicated task. A licensed insurance agent can offer an in-depth evaluation of the kind of liability your business faces and advise you on the best course of action.