How Much Does Small Business Insurance Cost?

If you’ve been researching business insurance costs and feel overwhelmed by the numbers, don’t worry — the price to insure your business isn’t as steep as you may think.

The fact is that all businesses face risks and make mistakes, and business insurance is a necessity. Plus, there’s a good chance you’re legally required to purchase certain policies depending on a number of factors. Personal plans simply don’t offer the same protection.

Let’s break down how much small business insurance costs, where to get it, and how you can save. But first, if you need a rundown of what business insurance is and what it does, our “What Is Business Insurance?” explainer is essential reading.

Small Business Insurance Costs

Unfortunately, there are no cut-and-dried answers to how much business insurance will cost you. It all boils down to your business’s unique details and what policies offer the best possible protection.

Are you a work-from-home sole proprietor buying a business owner’s policy? Is your endeavor risky, needing high limits on different types of liability insurance? For instance, your business may require professional liability insurance or a commercial vehicle policy. Do you plan on hiring employees and getting worker’s compensation insurance?

Simply put: What do you actually need? Are the worst-case scenarios just a way to justify forking over more money to insurance carriers?

It’s your hard-earned money — you deserve to know what you’re signing up for.

In general, a larger business with more options for risk will end up paying more than a sole proprietor. But that doesn’t mean that insuring your business has to break your budget, either.

In fact, for the amount of financial protection, you get in exchange for the inexpensive costs (especially in light of all the things that really can go wrong), you absolutely should pick up some sort of insurance coverage.

Breaking Down Small Business Insurance Costs

Generally speaking, how much small business insurance costs will depend on these things:

• Your risk profile
• The insurance provider you purchase through
• The types of policies you need
• The limits you choose for each policy
• Your claims history if you currently have coverage or had coverage in the past
• Your location and size of your business
• The number of employees you have
• Your payroll

Each of these will affect the policies intended to cover those business facets in proportion to the insurer’s financial risk.

For example, a roofing business has far more risks than a yoga studio or barber shop. There are so many more ways (not to mention the extent to which) laborers, and property could get harmed, both the business’s and its clients’. But having multiple types of coverage is beneficial for any business, and our guide on the types of business insurance available will help you.

The roofing company will need a business owners’ policy, workers’ comp, professional liability, commercial auto insurance, and probably garage liability insurance (due to using vehicles in its day-to-day operations). It may also need higher coverage limits to have all its bases covered. It’s also becoming increasingly important for businesses to have cybersecurity insurance.

Altogether, this is going to be reflected in higher insurance costs. More expensive mistakes mean more expensive insurance.

Here are ranges of common prices we’ve compiled by comparing the published monthly costs of reputable insurance carriers (The Hartford, Hiscox, Insureon, Progressive, NEXT, Embroker), rounded to the nearest dollar:

• General Liability: $30 (Hiscox) to $50 (Progressive)
• Commercial Property: $25 (NEXT) to $250 (Embroker)
• Business Owner’s Policy: $57 (Insureon) to $261 (The Hartford)
• Workers’ Comp: $45 (Insureon) to $70 (The Hartford) per employee
• Professional Liability: $45 (NEXT) to $59 (Insureon)
• Commercial Auto: $142 (Insureon) to $160 (Progressive)
• Cyber Insurance: $125 (Insureon) to $140 a month (Embroker)

As the ranges suggest, so many details affect what you pay. A sole proprietor looking for a single general liability policy with a million dollars in coverage might only pay as little as $30 a month. A construction company with employees, on the other hand, must pay far more.

Not all insurance policies — or carriers — are created equal. Endorsements, policy features, and exclusions vary along with the costs.

A dirt-cheap policy may have so many exclusions in the fine print that a claimable loss could only be met under super-specific, unrealistic conditions. At that point, you’re essentially uninsured.

Talk with a broker or insurance agent specializing in your industry to assess your risks and get a precise quote from a reliable insurance provider.

How Small Business Insurance Costs Are Calculated

Your insurance calculations will be completed by an actuary from an insurance company who will explore your space, your product, and your financial numbers and assess your particular risks. After that, the size and revenue of your company will factor into the ultimate decision.

Riskier, larger, and more profitable companies will require more comprehensive protection and will therefore pay more.

When you ask for a quote, you will need to provide the actuary with well-documented data and business numbers (square footage, payroll details, etc.), so be prepared.

Small Business Insurance Cost Factors

Let’s go over how the above-mentioned factors impact cost in greater detail.

• Risk Profile: The more risks that your employees and clients are exposed to, the more your business must pay.
• Insurance Provider: Not all insurance carriers charge the same rates or offer the same protections per their policies’ contracts.
• Policy Types: Specific and expensive risks cost more to have covered. Hiscox, for example, has an article on its website on the median cost of a cyber breach, which, at roughly $18,000, is a staggering $10,000 increase from last year alone.
• Coverage Limits: $1 million is a good starting point, and your premium will reflect how much coverage you purchase. Bumping up from $1 to $2 million can raise the price from a few hundred to a few thousand dollars a year, depending on the policy.
• Claims History: Businesses and individuals without an established claims history typically pay more. The same is true for those who have claimed numerous losses on their loss run reports.
• Location: Some areas are more exposed to crime and natural disasters than others, and carriers adjust prices based on those factors. Local legal requirements also affect the cost of insurance (as well as what types of insurance are required for businesses).
• Size: Having more space to insure, such as a larger physical storefront, will lead to higher premiums.
• Employees And Payroll: For workers’ comp, what you pay will rise depending on the number of employees you have and how much they make through your company. The Hartford estimates that an insured usually pays $1 in insurance for every $100 in payroll.
• Business Sales Reports: Your insurance costs scale with your earnings. An actuary will look at your numbers and see how much you — or they — might stand to lose.

How To Save On Small Business Insurance Costs

You can protect your business without going over your budget. Your location and claims history are out of your control for the most part, but there are things you can do to save on business insurance:

1) Bundle Policies

Bundling your insurance policies will often save you money. Consider a business owner’s policy, combining general liability and commercial property insurance. Extra add-ons may be available depending on the carrier.

2) Shop Around

The lowest quote may not always be the best deal in the long run if the company can’t (or simply won’t) follow through when you submit a claim. Remember, insurance companies are trying to make a sale, too.

Your business is important enough to do the research for the best coverage at the best price.

3) Choose A Higher Deductible

A deductible is the amount of money you will pay before your insurance kicks in. Choose a higher deductible, and your premiums will go down.

4) Group Rates

Group rates might be available for your industry. This could save you the big bucks and possibly get you better coverage.

5) Work With An Agent Who Specializes In Business

Find an expert on small business insurance instead of settling for an agent who might not know the specifics of your industry.

6) Pay Your Premium In Full

It may be cheaper to pay your premiums for the year in one lump sum rather than spread them out in 12 monthly installments.

Where to Buy Business Insurance

All the major insurance companies carry commercial business insurance packages. So, in addition to the carriers mentioned above, Allstate, Farmers, Nationwide, and Chubb all offer competitive rates.

Some companies specialize in small business insurance and walk a business owner through the process of optimizing their rate, leading up to an online quote. The Hartford and Hiscox are two examples.

Always check with the Better Business Bureau or your state’s department of insurance to examine your insurer’s viability. Talk with business owners in your area and use rating agencies, too.

Agencies such as Standard & Poor’s (S&P) and AM Best rate the financial strength of an insurance company, and you can use their services for free if you sign up for an account.

Comparing Business Insurance Quotes

It’s easy to get an online quote from an insurance company in minutes over the internet. That isn’t to say that scheduling a face-to-face meeting with your top three insurers is a bad idea.

Once you’ve narrowed down your choices, talking to a real human being could help you decide what insurance company you trust the most.

Not all business insurance plans will give you the same benefits, so here’s what to consider as you compare:

• Look at the rate as well as your premium. As your company grows, the rate may increase and price you out of your own policy.
• Cheaper isn’t always better. Carefully weigh the cost with the level of coverage you need, and don’t skimp on the coverage you need just to pay less.
• No insurance plan covers everything. Discuss and address exclusions to the policy to make sure there are no surprises.

You can grab comparison quotes from Bizinsure, Coverhound, and Insureon in a matter of minutes. They’ll compare all the major retail policies in one place. Make sure to have your number of employees, sales data, business address, and square footage ready to go.

Consult an insurance professional for advice. After carefully researching and comparing your options, pick the best one suited for your business, and rest easy knowing that you’ve got your business the coverage it needs — without breaking the bank.