Product Liability Premium Affordability Estimator

1. Enter annual premium
Use the full annual product-liability premium for the quote you are evaluating.

2. Use matching annual revenue
Enter revenue for the same planning period so the ratio is comparable.

3. Add operating profit
Use a positive annual operating profit figure to see how much of operating earnings the premium represents.

4. Set an internal budget
Enter the maximum amount allocated to this premium for a simple budget test.

5. Review ratios and gap
Use the status, monthly equivalent, and percentage ratios alongside—not instead of—the policy coverage comparison.

Where:

• Annual premium — quoted yearly premium, dollars
• Annual revenue — business revenue for the same annual period, dollars
• Annual operating profit — operating profit for the same annual period, dollars
• Maximum insurance budget — internal spending ceiling for this premium, dollars

Assumptions: The calculator evaluates affordability only. It does not score policy quality, expected losses, insurer strength, or whether the coverage limit is sufficient.

What the result means

Affordability ratios are internal planning measures and do not assess coverage adequacy.

Review the actual policy, quote, endorsements, exclusions, limits, and applicable requirements before making an insurance decision.

Given:

• Annual premium: $18,000
• Annual revenue: $2,500,000
• Annual operating profit: $300,000
• Maximum budget: $25,000

Calculation:
Revenue ratio = 18,000 ÷ 2,500,000 × 100 = 0.72%. Profit ratio = 18,000 ÷ 300,000 × 100 = 6.00%. Budget gap = 25,000 − 18,000 = $7,000.

Result:
The premium is within the entered budget by $7,000.

The ratios describe cost burden, while the policy still needs to be evaluated for limits, deductible, exclusions, and the product risk being insured.