Costs, Price Factors and 2026 Rules
What affects a CGL premium in Canada: the rating factors insurers use
How Canadian insurers rate commercial general liability, from industry class and revenue to claims history, contracts and subcontractors, with a worked rating example.
A commercial general liability (CGL) premium in Canada is usually built from a rate for your industry class, multiplied by an exposure base such as revenue or payroll, then adjusted up or down for your claims history, limits, deductible, contracts, subcontractors and location, with a minimum premium as a floor. Knowing which of those inputs you control is the fastest way to bring a quote down legitimately and to spot when a quote is cheap because something has been rated wrongly.
This guide is part of the business liability insurance cost overview. The rates and multipliers below are illustrative, chosen to show how the arithmetic works; each insurer's actual rating model is its own.
Step 1: the industry classification
The insurer starts by placing your business in a class. Classes group businesses with similar claims patterns: office consulting, food service, retail, light manufacturing, residential trades, roofing, and so on. Many insurers map their classes to the North American Industry Classification System (NAICS) codes used by Statistics Canada, though their own groupings are finer.
Why it matters:
- The class sets the base rate, and rates between classes can differ by a large multiple.
- The class also defines what the policy is meant to cover. If you describe yourself as an "interior designer" but also supervise renovations, the policy may be priced and worded for design work only.
- If your business has several activities, the insurer may rate each separately or rate the whole business in the class of the riskiest activity.
What you control: a precise, complete description of what you do and what share of revenue each activity brings in.
Step 2: the exposure base
The class rate is applied to a measure of how much business you do:
| Exposure base | Common for | Why it is used |
|---|---|---|
| Annual revenue (gross sales) | Retail, manufacturing, many services | More sales means more customers and products in circulation |
| Payroll | Contractors, trades, labour-intensive services | More labour hours means more site activity |
| Area (square metres or feet) | Premises-heavy risks such as warehouses or event spaces | Exposure comes from the premises themselves |
| Units | Apartment buildings, vehicles, seats, events | Exposure is counted per unit |
Policies rated on revenue or payroll are often auditable: you give an estimate at the start, and the premium is adjusted after the year ends on the actual figure. The premium audit guide shows how that adjustment works.
Step 3: a worked rating example
An illustrative café in Halifax with forecast revenue of $480,000:
- Base rate for the class: $3.10 per $1,000 of revenue.
- Base premium: 480 x $3.10 = $1,488.
- Limit: the café wants $2 million per occurrence instead of the insurer's $1 million base. Illustrative increased-limit factor: 1.25. Premium: $1,488 x 1.25 = $1,860.
- Claims history: one slip-and-fall claim three years ago. Illustrative surcharge: 10%. Premium: $1,860 x 1.10 = $2,046.
- Credit for documented floor-cleaning logs and mats: illustrative 5% credit. Premium: $2,046 x 0.95 = $1,943.70.
- The insurer's minimum premium for the class is $750, so it does not apply.
The same café rated at $380,000 of revenue would start at 380 x $3.10 = $1,178 and finish at about $1,539 after the same factors. That is why revenue estimates must be honest in both directions: too low and you face an audit bill and a possible coverage argument, too high and you overpay until the audit refund.
Step 4: adjustments that move the price
| Factor | Usually raises the premium | Usually lowers the premium |
|---|---|---|
| Claims history | Recent or frequent claims, open claims, large reserves | Several clean years, documented incident follow-up |
| Limits | $5 million instead of $2 million | Lower limit, if contracts allow |
| Deductible | No deductible | Higher property damage deductible you can afford |
| Contracts | Broad indemnity clauses, many additional insureds | Standard terms, insured contracts reviewed |
| Subcontractors | Subcontractors without their own insurance | Certificates on file showing adequate limits |
| Products | Imports from suppliers without Canadian insurance, products for children or food | Products from insured Canadian suppliers, recall procedures |
| Premises | Public traffic, alcohol service, stairs, ice and snow exposure | Controlled access, maintenance logs, snow contracts |
| Years in business | Start-up with no history | Established, stable operations |
Step 5: market and location factors you do not control
Some parts of the price come from outside your business:
- Province. Court awards, legal costs and claim frequency differ, and so do taxes on premiums. Ontario and Quebec, for example, add their own tax to many commercial premiums; see taxes on premiums by province.
- The insurer's appetite. Insurers expand or restrict the classes they want to write. A class one insurer declines may be routine for another, which is why a broker who approaches several markets can matter.
- Industry loss trends. When a class has bad results across the market, rates rise for everyone in it, including businesses with clean records.
How to use this when you shop
- Ask each broker or insurer which class code and exposure base they used.
- Check the revenue or payroll figure on the quote matches what you gave.
- Confirm the limits, aggregate and deductible are the same across quotes.
- Ask what credits are available for safety programs, certifications or memberships in industry associations.
- Put the final figures in the liability quote comparison tool and test a realistic claim.
If two quotes differ widely, the cause is usually one of three things: a different class, a different exposure figure, or different coverage. Find out which before you choose. For coverage differences, see CGL vs professional liability and choosing liability limits.
Frequently asked questions
Why does my insurer ask for revenue by activity?
Because different activities carry different risk. A hardware store that also cuts keys and delivers propane is rated differently for each activity. Splitting the revenue lets the insurer charge the right rate on each part instead of the highest rate on everything.
Will one claim make my premium jump?
It can. Insurers look at frequency and size, and an open claim with a large reserve weighs more than a closed small one. Ask your broker for your insurer's loss history report so you can see what the underwriter sees.
Is a minimum premium negotiable?
Rarely. It reflects the cost of issuing and servicing a policy. Very small businesses often pay the minimum regardless of revenue, so shopping among insurers with lower minimums is the main lever.
Do safety certifications reduce the price?
Some insurers give credits for recognized safety programs, especially in construction, but there is no universal rule. Ask, and keep documentation ready.
Sources
- Statistics Canada — North American Industry Classification System (NAICS) used to describe industries
- Insurance Bureau of Canada — how business insurance is priced, in plain language
- Canadian Council of Insurance Regulators — national guidance on fair treatment of insurance customers
- Financial Services Regulatory Authority of Ontario — insurer conduct rules in Ontario
