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How Much Should Small Business Insurance Cost?

Cori Alexander - Nov 25, 2020 9:31:00 AM

small business insurance cost

Whether you're a new business owner looking to purchase small business liability insurance for the first time, or a business veteran who is seasoned in insurance policies, you deserve to know how much you should be paying for business insurance. 

It would be great if you could just get a bunch of random business insurance quotes, buy the cheapest option, and never think about it again. But having the right insurance coverage is just as important as not paying too much since your business insurance coverage needs to protect your company from unexpected expenses such as accidents, lawsuits, and natural disasters. And if you don't have the right coverage, those same events could close your business without warning. 

So before getting into pricing specifics, let's first discuss a few crucial factors you'll need to understand to ensure your business is appropriately covered. 

Understanding Business Insurance Policies

A small business insurance policy typically includes a variety of coverage types. And if you want to get the most bang for your buck, you should understand the typical insurance rates of the most common types of business insurance.

Several factors help determine your small business owner's insurance premiums, including the specific business industry you are in, your assets, what property you own, the number of employees you have, the size of your payroll, and your claims history.

In general, you'll want to consider a few different types of insurance coverage in your small business insurance policy, including a general liability policy, workers’ compensation insurance, commercial property insurance, and business income coverage. The good news is that you can combine these coverages into a single business owners policy. The cost of a combined policy varies based on various factors, but will likely result in significant cost savings over purchasing each type of policy individually.

Do You Want Insurance or the Right Insurance?

Every business needs some type of business insurance for legal and financial protection against liability in a crisis. To pick the best insurance for your organization, you need to analyze your business assets, liabilities, and risks, and determine how comprehensive or basic your policy needs to be.

Common insurance policy coverage includes general liability, business interruption, product and management liability, auto, errors and omissions, workers’ comp, and business owners policies. Knowing how many types of insurance there are can be overwhelming, and it can be tempting to sign up for only the coverages that you are legally required to have. However, that's a dangerous approach to risk management because even a single incident that you are uninsured for can cost your company so much that it puts you out of business.

Purchasing insurance for your business can be complicated and time-consuming, but it is critical. Many entrepreneurs sign up for an insurance policy without fully understanding what they are signing up for. And with so many types of business insurance available, it can be tough to know what you need. But an insurance agent can help you find the right business owners policy that meets all your unique needs and still meet the needs of your budget. 

General Liability

General liability insurance, often called business liability insurance or commercial general liability insurance, protects your business from property damage and bodily injury claims that can happen during normal business operations. 

General liability coverage helps cover expenses like paying for a customer’s medical expenses if they slip and fall in your place of business, repairs to fix a wall that was accidentally damaged at a customer’s home, and legal costs to defend your business in a lawsuit. 

While the median cost of this type of insurance is around $53 per month, several factors can contribute to the cost of general liability insurance. Some of these factors may include:

  • Business Property Condition and Size – The larger your business is, the higher risk there is for claims, resulting in higher general liability insurance cost. The condition of your property can also play a role in the monthly cost. Newer buildings often have lower costs as they are deemed safer.
  • Business Industry – Certain types of industries or professional services are deemed to be more hazardous, which means they have a higher annual premium. For example, businesses that use heavy machinery would likely pay a higher premium than an office business.

Workers’ Compensation

Workers’ compensation insurance is often required in most states. It gives benefits to employees if they become ill or are injured due to work. This coverage pays for medical, lost wages of the employee, and more. The average monthly cost of workers’ compensation insurance is $85, but several factors can impact that amount, including the following:

  • Industry – Businesses that are considered more dangerous will often have to pay more for this type of coverage, just like they do for general liability insurance.
  • Payroll Size – Because this insurance pays benefits to employees based on their salary, the more people on your payroll and the total amount of the payroll can influence your monthly premium cost.
  • Claims History – If you have only had a few claims for workers’ compensation made against your business, you may have a lower policy fee. However, if you have a higher volume of past claims, you can expect higher premiums. 

Business Insurance (Business Owners Policy)

A business owners policy, or BOP, aggregates various insurance types that can lower costs. The average cost of a business owners policy is $80 per month. This premium may be higher based on the type of business you own, what policy limits you choose, whether you choose a higher deductible or not, and the types of insurance you choose to include in your bundled policy.

Finding the most affordable business insurance policy is almost always a top priority for a business owner. Still, you should always weigh the price of the policy against the coverage it provides. You never want to pay for coverage that you don’t really need, but you also want to have the right coverage if something happens.

An insurance agency can help you maximize your savings by analyzing your business to see what your specific needs are. Your insurance agent will help you rule out any coverages that don’t apply to your business. You will also be able to save money by adjusting your deductible, or the amount you will have to pay out of pocket toward a covered loss. A higher deductible usually results in a lower cost, but be sure that you are comfortable with the amount in the event you ever have to pay it.

How to Find the Best Option

Unfortunately, many advisors and insurers make getting the right policy harder than it has to be. Or they are biased toward their own insurance company's products and don't show you other options that would be better for you. You need a guide, not another salesman. You need a trustworthy partner who listens, advises, and translates complex jargon into easy terms. 

At Conover, our independent advisors show you all of your options without any bias toward a specific policy or company. We exist to get you the best plan, no matter where it comes from. And we simplify everything and help you get exactly what you need.

You can get a free quote today to start shopping around for the right business insurance policy, and the best price, of course. But we are also here to help in any way you need, so feel free to bring any questions you have to one of our advisors.

Questions for an advisor?

Topics: Commercial Insurance- Commercial Insurance- Featured

Cori Alexander

Cori Alexander

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