Before we provide answers on how much does business insurance cost, consider the potential expenses you would face without insurance coverage.
There are business insurance benefits that far outweigh the costs. And the cost factors vary by the types of business insurance you need.
Let’s detail the types and average small business insurance costs.
How Much is Business Insurance
Choosing the right type of insurance policy is an important part of the process. Start by making a list of your risk exposure.
Do clients frequently come to your business location? Is the majority of your business conducted online? Are you operating from home? Do you need coverage for vehicles? Do you employ staff?
Every business situation is different. Let’s look at the basics:
Professional Liability Insurance Cost
Professional liability insurance is also called Errors and Omissions. This type of small business insurance is needed by owners who offer professional services, such as accountants, dieticians, financial advisors, lawyers, and more.
Average monthly cost: $50
General Liability Insurance Cost
You need general liability insurance if you have products. Someone could get injured by your product, or your product could cause personal or property damage. The cost for general liability may vary according to the policy limits for how much coverage you require.
Your general liability insurance also covers you if a client or customer suffers a personal injury at your place of business during normal business operations.
Average monthly cost: $50
Workers Compensation Insurance Cost
If you have employees, worker’s compensation insurance is a legally required business insurance policy no matter what your number of employees, one or 50. It’s a small business insurance cost that can’t be avoided. If you have employees, they could have workplace injuries. Workers Comp insurance will cover you if an employee suffers bodily injury and has claims related to medical costs.
Average monthly cost: $78 a month, or $900 per employee.
Commercial Property Insurance Cost
People operating a business from home often overlook commercial property insurance. Most basic homeowner’s insurance policies don’t cover the cost of specific business equipment you have in the home, such as computers, software, and production equipment.
If you own or lease a space for your business, commercial property insurance will protect your business equipment and any stored inventory or products. This coverage also extends to physical damage to the building itself. The costs can vary significantly based on the type of business. For instance, the insurance rates for a specialty paint manufacturer will differ from the average annual premium for a clothing manufacturer.
In addition to working with hazardous materials (such as flammable paints and glues), there are other factors that would determine whether or not your business has a higher risk of operations.
Average monthly cost: $100 to $2,000.
Business Owners Policy BOP
With a business owner’s policy, you can combine general liability insurance, professional liability insurance, and commercial property insurance. Increasingly, an insurance company may combine more coverage by allowing you to add cyber liability insurance to provide more comprehensive coverage.
The typical price of a BOP is less than the total of the policies if taken individually from an insurance provider.
Average monthly cost: $300 to $3,500
Read More: best small business insurance companies
Cyber Liability Insurance Cost
If you’re a small business owner who’s conducting any aspect of your business electronically, you need this type of insurance. If you have a data breach, you could expose customer information – such as payment info, addresses and phone numbers, etc. – to the web.
Cyber liability coverage encompasses the expenses associated with data recovery and system restoration. Additionally, it assists in covering legal fees if you face a lawsuit due to a data breach.
Average monthly cost: $145
Umbrella Insurance Cost
In addition to a BOP, an insurance company may offer a CPO, or Commercial Property Owner’s policy. Small business owners who have a fleet choose this type.
The CPO will include Commerical Property Insurance but also allow you to “umbrella” commercial auto insurance. Many factors affect how much the annual premium will be – such as the number of vehicles, use of the vehicles, and size of the vehicles (for example, van or tractor-trailer).
Average cost: $1,000 to $3,000 annually per $1 million valuation; smaller businesses can expect to pay about $700 annually.
Commercial Auto Insurance Cost
Are you using your personal vehicle for your business? In other words, is the family mini-van being used to deliver candles or cupcakes, etc?
You should monitor your mileage as a business expense. To decide if you require a commercial auto policy, you need to differentiate between how much of your annual mileage is for personal use versus how much is for commercial purposes.
If you lack commercial auto insurance and are involved in a business-related accident, you may need to provide some clarification.
Average monthly cost: $140, depending on the type of vehicle.
Disability Insurance
Often overlooked, obtaining disability insurance can be one of the smartest financial choices you make. This coverage can help pay for some of your business expenses if you become injured or ill. It is particularly crucial for individuals in high-risk occupations, such as contractors and landscapers, who may be more prone to serious injuries on the job.
The annual cost is typically about 4% of your income.
Hazard Insurance
This is another type of insurance that is often overlooked. Frequently, commercial property policies and homeowner’s policies do not provide coverage for natural disasters like hurricanes and earthquakes.
Also, commercial property insurance may not include the outside of your business, such as signage and landscaping. Hazard Insurance picks up that slack.
Average monthly cost: $60-$200
Factors Affecting Small Business Insurance Cost
Here are factors that affect small businesses’ insurance costs:
- Business Assets
- Number of Employees
- Claims History
- Professional Services Offered
- Geography/Location
- Number of Years in Business
- Type of Business
- Need for Vehicle Insurance
- Home-based or physical location
- Types of coverages needed
How to Reduce the Cost of Small Business Insurance Premiums
Many business owners have become savvy about ways to save money on business insurance coverages. And that leads us to our first tip on how to reduce cost.
- Seek expert advice from other small business owners
- Group policies under one umbrella
- Take steps to minimize risk
- Save by adding safety measures such as alarm systems and updated software.
Choosing the Right Insurance Company for Your Business
Although many insurance providers offer free estimates, your time isn’t free. It’s likely that you could literally spend hours researching different insurance companies.
Try to whittle down your search by:
- Listing the types of business insurance coverage you need.
- Networking with other small business owners.
- Working with an independent insurance agent or insurance company with small business insurance experience, who can wade through the choices and report back to you.
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