Businesses have always been the strength of the great American economy, irrespective of size. But they require a lot of hard work to flourish. Unfortunately, there are various events, both within and outside of your control, that might bring your company to its knees before it has a chance to develop. That is why small company insurance is required.
The first step is to get adequate protection for your business is to knowing the cost of business insurance. Like most insurance policies, the cost of business insurance varies greatly from one company to the next. As such, similar businesses within the same industry may have different quotes.
This article will assist you in understanding the cost of business insurance and why the cost differs.
- How much does business insurance cost?
- How much is the average small business insurance cost per month?
- How much does small business liability insurance cost?
- How to calculate small business insurance cost?
- What factors affect your small business insurance cost?
- How to find cheap small business insurance
- Small business insurance requirements
How much does small business insurance cost?
To properly cover a small firm with few or no workers, small business insurance might cost between $500 and $1,000 a year. However, the cost of business insurance can vary depending on the unique circumstances of your business and the type of coverage you need.
Generally speaking, the following is a list of coverages that make up business insurance and how much they cost.
These are just the averages. Be sure to shop around with a few companies or work with a digital broker like CoverWallet or commercialinsurance.net to compare several quotes before making your final decision:
Workers’ compensation insurance cost
Workers’ compensation is compulsory in most states, and the insurance policy pays for medical expenses and missed earnings caused by an on-the-job accident or sickness. It protects employees by exempting them from paying for their medical expenses. Employers that provide this policy are sometimes protected from being sued by their employees in some states.
Most workers’ compensation insurance coverages are paid individually and cost about $38 per month. Depending on your region, sector, and employee compensation, the monthly charge per employee, can range from $5 to $240 ($35 to $2,876 per year).
Learn more about the details of workers comp insurance cost
Commercial auto insurance cost
If you use a vehicle for any business purposes, you will need commercial auto insurance. Your personal auto insurance policy doesn’t cover you when you drive a vehicle for business reasons. Even worse, if you personal auto insurance company discovers that you use your vehicle for business purposes, they may drop you off together and you may have a difficult time getting personal auto insurance coverage. Learn more about why you need commercial auto insurance and your personal auto insurance
On average, a commercial auto insurance policy costs $135 a month. It varies depending on several factors. Learn more about the details of commercial auto insurance cost.
General liability insurance cost
After workers ‘ comp, this is usually the top priority for most business owners. General liability insurance covers your company if you or your workers cause damage or physical harm to anyone else. This policy covers litigation and claim costs such as settlements, legal fees, and damages.
General liability insurance costs about $46 per month on average. However, you might pay as little as $21 or as much as $166 ($250 to $2,000 per year), depending on several factors.
Learn more about the details of general liability insurance cost
Commercial property insurance cost
Commercial property insurance protects your business’s property, assets, and equipment from damage, theft, and malfunction and replaces lost revenue.
The average monthly cost of commercial property insurance is $85; however, prices can range from $42 to $417 ($500 to $5,000 per year). The premiums differ depending on your region and assets.
Learn more about the details of commercial property insurance cost
Business Owners Policy (BOP) cost
A business owner’s policy (BOP) is a policy bundle that contains important insurance coverages that most small companies require. General liability and commercial property insurance are typically included in a business owner’s policy.
A typical monthly premium for a business owner policy (BOP) is $100. Rates can range from $42 to $292 per month ($500 to $3,500 per year) depending on your assets, region, and risks.
Learn more at the BOP insurance cost
Professional liability insurance cost
Professional liability insurance protects your company if a customer or client claims your service caused damages that resulted in losses and decides to sue you.
The average professional liability insurance policy is $60 per month. Depending on your business, location, workers, coverage, and restrictions, monthly charges range from $40 to $84 ($500 to $1,000 yearly).
Learn more about the details of professional liability insurance cost
Errors and Omissions insurance (E&O) cost
Errors and Omissions insurance policy protects your company from claims of carelessness, errors, and oversights made during your employment.
Typical E&O insurance costs $145 per month. Premiums can range from $75 to $167 per month ($900 to $2,000 yearly) depending on your profession, location, clients/customers, and the number of staff.
Learn more at the E&O insurance cost for different professionals
How much is the average small business insurance cost per month?
The average business insurance cost is $65 per month. But it depends on several factors as we detail below. The coverage types play a big role in small business insurance cost. Below is the summary table of the average costs of different small business insurance coverages:
| Small business insurance coverages | Average costs |
| Workers comp insurance | $38 per month per employee |
| Commercial auto insurance | $135 per month |
| General liability insurance | $46 per month |
| Commercial property insurance | $85 per month |
| Business Owners Policy (BOP) insurance | $100 per month |
| Professional liability insurance | $60 per month |
| E&O insurance | $145 per month |
Again, these are just the averages. Your quotes and rates will be different. Be sure to shop around several companies or work with a digital broker like CoverWallet or commercialinsurance.net to compare several quotes online to find the cheapest one for your business .
How much does the small business liability insurance cost?
The small business liability insurance refers to both general liability insurance and professional liability insurance. General liability insurance is the most popular insurance policy for small businesses. If you can only afford one policy, let it be general liability insurance.
However, if you are in the business of providing advice and services like business consultant, financial advisor, lawyers, etc. the most important insurance policy is professional liability insurance.
In most cases, if you can get one main policy, either general liability insurance or professional liability insurance, you can always add another coverage as an endorsement to the policy. You can get both coverages on one policy.
The average cost of small business general and professional liability insurance is $106 per month.
| Small business liability insurance coverage | Average costs |
| General liability insurance | $46 per month |
| Professional liability insurance | $60 per month |
Learn more at how much business liability insurance costs
How to calculate small business insurance cost?
There isn’t a master formula that you can just provide some basic inputs like the industry your business operates in, your revenue, the number of your employees, etc. and it will help estimate how much your small business insurance would cost. We wish there was such a calculator.
The reason there isn’t such a calculator is because small business insurance is rather complicated. First of all, you have to know the coverages your small business must have, or should have, or may have. To answer that question correctly, you may need to work with a knowledgeable agent or broker.
After knowing the coverages you want to buy for your business, the most effective way to calculate how much they would cost is to get quotes for these coverages from different carriers or brokers. After your get quotes for these coverages, it is relatively easy to estimate how much your small business insurance costs.
Learn more details at Small Business Insurance Cost Calculator
What factors affect your small business insurance cost?
Different insurers will offer different pricing for their business insurance. But then, most insurance companies will consider the following factors when they determine your quotes:
The industry where your business belongs
Insurance companies consider certain occupations inherently hazardous than others. Ideally, the more risk your occupation has, the more you will pay to insure your company.
This is one of the reasons why a mechanic or manufacturing company might pay more than a florist or home-based retail store, even if they are buying the same policy. More so, when you buy worker’s comp insurance, the insurer might be interested in the job functions of all your employees in calculating your premiums.
Location of your business
Insurance premiums might differ depending on where your company operates. This is especially true for workers’ compensation insurance because state laws determine everything from coverage amounts to how you must obtain the policy.
Commercial auto insurance costs are also affected by location. Like worker’s comp, state governments also have minimum requirements that you must meet in terms of commercial auto insurance. Even then, premiums for commercial auto are usually higher in cities and locations with a high rate of accidents and claims.
Commercial property and liability insurance might also vary by state and zip code. Rural locations, for example, may have higher property rates than metropolitan areas. One factor contributing to this is that fire stations and fire hydrants are more difficult to reach in rural areas.
Similarly, a store in a city may have to pay extra for liability insurance. The higher cost comes from the fact that there are usually more people in cities than in rural areas. More people on your property means more risk.
Size of your company
The cost of your company insurance is directly proportional to the number of workers you have. The reason is that increased staff means more chances of injury, incident, or accident.
So, if you have a large company, you should expect to spend more on business insurance than smaller companies with few or no employees. Furthermore, firms with no employees may be excluded from state workers’ compensation laws. That way, they can save some money on business insurance.
Your payroll
Your yearly payroll is the main factor determining how much you pay for worker’s comp insurance. At the moment, the average cost of Worker’s compensation is between $0.8 and $2.5 for every $100 salary per month.
That means, if your company’s monthly payroll is about $1,000 per month, you could be paying up to $22.5 per month. However, if the monthly salary is about $2,000, you could be paying as much as $45 per month for workers’ comp insurance.
Revenue of your company
Insurers also use your revenue to assess risk in terms of business insurance. Small businesses frequently pay less for insurance coverage compared to bigger corporations. This is because small businesses handle fewer risks.
In general, the larger your revenue, the more vulnerable you are to danger. General liability insurance is particularly dependent on your revenue. The idea is that the more consumers you have, the more likely that you will offend them or that they will get injured on your property.
It is easy to understand since the more money you make, the more exposure you will have. And the more your exposure, the more coverage you will require, so you don’t lose your money. The cost of your insurance grows in direct proportion to the extent of risk exposure.
Previous claims
Someone once said history is a good predictor of the future. The same goes for insurance companies; a business with a long history of many insurance claims is risky to insure. Such a firm is either too dangerous, or the company does not take risk-mitigation measures seriously.
Deductibles and coverage
The final factors we will discuss are your deductible and coverage limits. These two factors determine how much your policy will payout and the conditions for payment.
A coverage limit is a term insurers use to describe the maximum amount you will get from your insurer if a covered peril happens. However, the deductible is the amount you will pay out of pocket to cover the peril. Usually, the higher coverage limit means you will pay more for your coverage. However, choosing a low deductible will raise the cost of your commercial insurance coverage.
A commercial vehicle insurance policy with comprehensive coverage, for example, will cost more than one with the state’s minimal liability coverage. Similarly, a general liability policy with a $2 million aggregate maximum will have a higher premium than one with a $1 million limit.
How to find cheap small business insurance
The greatest way to save money on your company insurance is to file a few claims against it.
If you do the following steps, you may frequently get a discount on your business insurance:
Compare quotes
The only sure way to make sure you don’t overpay for your small business insurance coverage is to shop around with a few companies or work with a top digital broker like CoverWallet or commercialinsurance.net to get and compare several quotes online in one place to find the cheapest one for you business.
Shopping for several quotes online might be time consuming. CoverWallet is a great solution to be able to compare several quotes online in one place.
Combine your coverage.
Most insurance companies encourage their clients to buy as many policies as possible. So, to encourage their customers, they might offer you discounts when you combine numerous business insurance, such as a business owner’s policy. So, if the company offers all you need in one place, consider buying everything from the insurer.
Prepay your yearly premium
This is usually an expensive option, but it works. If you are willing to pay annually rather than monthly, your insurer may give you a discount. In some companies, this discount can be up to 25%.
Modify your deductibles
A greater deductible usually equates to a cheaper premium. However, a large deductible means you will have to pay more from your pocket in the event of an accident. So while you try to adjust your deductible, ensure you can still cover the cost if an accident occurs.
Commit to workplace safety.
Insurance companies reward organizations who are conscientious about worker and consumer safety but penalize those with a history of accidents, workplace injuries, or negligence claims.
To enjoy this benefit, ensure you reduce your risk profile by regularly providing proper safety training and maintaining your facilities.
Small business insurance requirements
There are many insurance coverages small businesses could have to protect their businesses and their assets. However, only 2 coverages are required by laws:
Commercial auto insurance is required by law in all 50 states. If you drive a vehicle for business purposes, you need to have commercial auto insurance.
Workers comp insurance is required by law in all 50 states, except Texas. If you hire a full-time employee, you must provide workers to comp insurance for them.
Other small business insurance coverages are optional. Some coverages may not required by laws, but they may be required by other parties such as your clients or your employees. For example, E&O insurance for insurance agents is required by brokers and agencies before they hire you; doctor malpractice insurance is generally required by hospitals and clinics; and many clients require contractors to have general liability insurance coverage before signing the contract.
