Small business owners have never-ending expenses. You know you need insurance, but you don’t have a lot of extra money to spend on it. What can you do? Is there a way to get cheap business insurance?
- How much does small business insurance cost?
- What affects how much I pay for small business insurance?
- Getting cheap business insurance by comparing quotes online
- Getting cheap business insurance by bundling coverages
- Reduce business insurance cost by getting only the necessary coverages
- How to reduce commercial auto insurance cost
- How to reduce workers comp insurance cost
- How to save money on general liability insurance
- How to find affordable professional liability insurance
- How to reduce commercial property insurance cost
- How to save money on Business Owners Policy (BOP) insurance
- How to find a low-cost small business insurance provider
How much does small business insurance cost?
What you pay for business insurance depends on a number of factors. The first one is the type of business insurance coverage you get. These are the averages of some of the most common types of business insurance.
|Type of insurance||Average cost|
|General liability||$65 a month|
|Business Owners Policy||$99 a month|
|Professional Liability||$97 a month|
|Workers compensation||$38 a month per employee|
|Cyber liability insurance||$124 a month|
|Commercial umbrella insurance||$1,500 a year|
|Commercial auto insurance||$750 to $1,200 a year per vehicle|
|Employment Practices liability insurance||$800 to $3,000 a year|
|Directors and Officers insurance||$600 a year|
|Commercial property||$742 a year|
You will not need every type of business insurance, and your costs may be much less than the average. Always compare several quotes to find the cheapest one for your business.
>>MORE: Business Insurance Cost for Different Coverages
What affects how much I pay for small business insurance?
- Type of coverage
- Industry (higher risk = higher premiums)
- Location (some states are more litigious than others)
- Payroll (for workers’ comp)
- Claims history
- Coverage limits
Some industries are riskier than others. High-risk industries, such as construction, roofing, or manufacturing, pay much high premiums than, say, an accounting firm or a locksmith.
The types of insurance most affected by location are commercial auto insurance and workers compensation insurance. Every state has regulations regarding how much commercial insurance you need (for example, 25/50/10) and if your small business is located in a city, you’ll pay more. Cities have higher claim rates, due to theft, vandalism, and accidents, thus the higher rates.
Some states offer workers compensation insurance only through a state fund, some offer a state fund as an option, and many states don’t have state funds. Also, some states use the National Council of Compensation Insurance class codes, and some use their own class codes. This will affect your premiums as well. And of course, workers compensation is calculated directly from payroll, so the higher your payroll, the more you’ll pay for insurance.
The size of your business also affects how much you pay for business insurance. If you run a small mom-and-pop restaurant, you won’t pay nearly as much in insurance as, say, Applebee’s. Bigger companies mean bigger pockets, which encourages more lawsuits. Also, as far as general liability insurance goes, the rationale is that the more customers you have, the more likely it is that a few of them will trip and fall and injure themselves.
Like every type of insurance, if you have filed a claim in the past, your rates go up. Insurance companies will look at your claims history and reason that either your business is very risky or you’re not going far enough to ensure safety. It’s the same as car insurance: if you have a history of accidents, the likelihood that you’ll have another accident is higher than for someone whose never had an accident.
Finally, your coverage limits and your deductible will affect how much you pay. A higher coverage limit will be more expensive, whereas a higher deductible will lower your rate.
Getting cheap business insurance by comparing quotes online
The only certain way to make sure you are not overpaying for your business insurance coverage is to compare quotes from several companies before making your final decisions. Different companies have their own strengths and industry focus and may assess the risk of your business differently. Before getting quotes from them, you don’t know if a company is focused on the industry your business is in and thus has a lot of experience and cheaper quote for your business.
You can get quotes from digital brokers who can provide you with several quotes at once. But sometimes digital brokers may not work with the insurance companies that you are interested in. In such case, you can get quotes from these companies directly. Learn more where you can get and compare business insurance quotes online here.
Getting cheap business insurance by bundling coverages
As a small business, you may need several coverages to protect your business, but you may not need several standalone policies. Bundling several coverages that you need is a great way to save money on your business insurance.
Business Owners Policy (BOP) is a common policy that small business would get. It usually bundles general liability and commercial property coverages in one policy. It is also common that business income interruption coverage is also included in the BOP policy.
You can also find BOP policies that include data breach or cyber security coverage and employment practices liability coverage as additional endorsements. It might cost extra for these additional endorsements, but still much cheaper than having additional stand-alone policies for these coverages.
Reduce business insurance cost by getting only the necessary coverages
Your small business might not need all types of business insurance coverages, so only get the coverages that you need will help reduce your business insurance cost. Below are the most popular 5 business insurance coverages that most small business would need:
- Commercial auto insurance: this is required by all states. If you use a vehicle for your business, you must have it. Learn more at the best commercial auto insurance companies
- Workers comp insurance: This is required by almost all states, except Texas. There are exceptions in each state, so be sure to look into your state laws to determine if you need it for your small business or not. Learn more at the best workers comp insurance companies.
- If you are a sole proprietor, you are most likely not to need it. If you do, learn more at the best workers comp insurance for sole proprietors. If you are an independent contractor, here are the best workers comp insurance providers for independent contractors.
- General liability insurance: If small businesses need to have one coverage, this is it. Learn more at the best general liability insurance companies.
- Business Owners Policy (BOP): If your business operates in a physical location that you own or rent, you will need to have commercial property insurance. Instead of getting a standalone commercial property policy, you may want to combine it with a general liability policy to save money. In such case, you will need to get a BOP policy. I can also add other coverages to you BOP policy such as cyber coverage or business income interruption coverage. Learn more at the best BOP insurance companies.
- Professional liability insurance: If your business provides advice and/or services to others, you may want to have professional liability insurance. Learn more at the best professional liability insurance companies.
Here’s how to reduce costs on these popular business insurance coverages:
How to reduce commercial auto insurance cost
There’s not much you can do about what industry you work in and where you’re located, but there are some strategies you can use to save money on commercial auto insurance:
- Hire safe drivers
- Maintain vehicles
- Purchase dependable vehicles
- Provide safe driver training
- Monitor employees driving habits—many insurance companies have mobile apps which monitor driving performance and can also save you money.
Read more: How Much Does Commercial Auto Insurance Cost by State and How to Find Cheap Commercial Auto Insurance
How to reduce workers comp insurance cost
Workers comp is based on a formula:
Payroll (per $100) X Class code rate X Experience modification rate = premium
To save money on workers’ compensation insurance, you need to make sure to classify your employees correctly, as being just one number off can cost hundreds of dollars. Ultimately, though, the only thing you really have control over is your experience modification rate. This usually ranges from 0.75 to 1.25, with lower being better. To get a lower score, you need to provide a safe workplace:
- Create a risk control safety plan and post it where everyone can see it
- Investigate all accidents and near-misses to see what you can improve on
- Clean up spills and other hazards immediately
- Use ergonomically friendly furniture
- Ask workers to identify hazards they see and address them
- Train all workers on safe practices
- Build and maintain a return-to-work program
Read more: How Much Does Workers Compensation Insurance Cost? and The Cheapest Workers Comp Insurance Companies
How to save money on general liability insurance
General liability insurance: To save money on general liability insurance, try these strategies:
- Shop around. This goes for every type of insurance, not just general liability. Get quotes from at least three companies. You can use companies such as CoverWallet or CoverHound to get you a few quotes to compare.
- Choose a higher deductible.
- Bundle your general liability insurance with other policies, for discounts of 5% to 10%. Depending on your insurance company, they may offer homeowners and personal auto coverage as well, so you can bundle those with your general liability insurance to save some money
- Don’t buy more insurance than you need. Get what you need, but you don’t have to buy every type of business insurance out there.
Read more: How Much Does General Liability Insurance Cost in 2021? And The Cheapest General Liability Insurance Companies
How to find affordable professional liability insurance
You can’t really adjust the number of years of experience you have, but there are a few things you can do to save some money on professional liability insurance:
- Look into professional organization member discounts
- Pay your premium upfront
- Maintain good safety standards.
- Communicate effectively. Oftentimes, people are sued not because they did something wrong but because clients feel they don’t care. This is especially true of doctors, but it holds up for every other profession.
Read more: Professional Liability Costs for Different Professionals
How to reduce commercial property insurance cost
You can’t do anything about the age of your building or how it’s constructed, but you can do the following things to reduce the commercial property insurance cost:
- Install burglar alarms, fire systems, and smoke detectors
- Maintain the exterior and make sure it’s free of leaves, snow, and dirt.
- Make sure all tenants have insurance (renters or other businesses)
Read more: The 6 Best Commercial Property Insurance Companies for 2021
How to save money on Business Owners Policy (BOP) insurance
The same strategies for general liability insurance will apply here, but you can also add cyber liability insurance or business interruption insurance coverage to your BOP insurance to save some more money.
Read more: BOP Insurance: Who Needs it, Coverage and Costs
How to find a low-cost small business insurance provider
There are so many small business insurance providers out there. If you want to get cheap business insurance coverage, you may want to find an affordable or low-cost provider. Pay attention to the following characteristics to make sure a business insurance provider offer low-cost coverage.
- Online quotes and buy the policy online
- Simple, easy to understand polices
- Customer service: it doesn’t do you any good if you have questions and can’t find anyone to answer them
- Financial strength: you want to make sure your insurance company has the resources to pay claims
- Mobile app: mobile apps make it easy to file claims, pay bills, and ask questions
- Online bill pay—saves you time, which is money to small businesses
How do I figure out how much business insurance I need and what kind?
Sometimes a contract will require you to have general liability insurance, in which case they will specify how much insurance you should have. Many small businesses have $1 million in general liability coverage.
Talk to owners of similar businesses and find out what insurance they have. If you have a professional organization you’re a member of, they can be a great resource as well. You could ask on social media, especially if your town has a community forum.
The average policy limit for most types of business insurance is $1 million in coverage.
Running a small business is complicated but buying business insurance doesn’t have to be. Shop around, get a few quotes, and then you can get on with running your business.
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