Small Business Insurance Cost

Starting costs and the factors affecting your rates

Reviewed by Anthony BattleReviewed by Anthony Battle

The cost of a business owner’s policy, which is a package of coverages that many businesses need, can start as low as $300 annually based on our team’s research. But the annual premium your business pays will depend on factors like your location and industry. The coverages you choose and any endorsements you add will also influence your cost. 

We’ll cover the types of business insurance you may need, the factors influencing their cost, and other common questions about getting the best business insurance for you so you can make the right decisions for your budget. 

How Much Is Business Insurance?

Insurers tailor their business insurance policies to individual businesses, and factors such as coverage type can influence pricing. However, many business insurance companies cite a starting premium used for lower-risk small businesses. Our data show a range of starting costs for the most common types of business insurance.

Here are the lowest premiums that some of the best small business insurance companies charge for a few different types of policies.

Cost is an important consideration when choosing an insurance company, but the cheapest option may not be the best fit for you. Companies’ ratings and customer reviews vary, some provide more digital tools than others, and some policies may have gaps in coverage while others come with needed endorsements. It’s important to consider all these factors when comparing business insurance quotes. 

Factors Influencing Cost

Industry or Profession

How much business insurance costs is based on the level of risk your business presents. For example, a construction company, garage, or restaurant will have many more liability risks than a retail store or office. Businesses that use expensive equipment will have higher commercial property costs, and businesses that own and operate vehicles will have additional commercial auto costs. Your business income will also impact the cost of business insurance and whether you qualify for a small business owner’s policy.  

Business Location

Some locations expose businesses to greater risks than others. If your business is in an area prone to natural disasters or high crime rates, you’ll likely pay more for commercial property insurance than if your business is in a low-risk area. Your cost will also depend on whether you rent or own your space as well as its size. State regulations, such as workers’ compensation insurance requirements, can also impact your costs. 

Claims History

Business insurers check your prior claims history to identify trends that may indicate your business is high-risk. If you’ve battled frequent lawsuits, your insurance company may charge you a higher premium because it may assume your business isn’t taking the right precautions to avoid risk. 

Number of Employees and Customers

If your business has employees, you’ll likely need workers’ compensation insurance. The cost will be based on the number of workers your business employs. Business insurance companies also look at your annual revenue when determining your premiums, since serving a large customer base and handling a high volume of inventory inherently exposes your business to more liability and property risks. 

Coverage Needs

When purchasing a business insurance policy, you’ll select the coverage options your business needs, add any necessary endorsements, choose your annual coverage limits, and choose your deductible. Choosing higher annual aggregate liability limits will increase your premiums, as will choosing a $0 deductible for your property insurance. 

Types of Business Insurance

• General liability insurance: General liability insurance covers legal fees and judgments for lawsuits related to bodily injury, personal and advertising injury, and property damage as a result of non-professional negligence 
• Commercial property insurance: Covers rebuilding, repair, or replacement of buildings and their contents and equipment after a covered peril, like a fire or vandalism
• Business interruption insurance: Helps pay for ongoing expenses and debts as well as replace lost business income after a covered event, like a windstorm
• Business owner’s policy: A business owner’s policy is a package of coverages that includes general liability insurance, commercial property insurance, and business interruption insurance
• Professional liability insurance: A professional liability policy covers legal fees and judgments from lawsuits brought by customers claiming professional negligence, such as inaccurate advice or misrepresentation
• Workers’ compensation insurance: Required in most states for businesses with a certain number of employees, workers’ compensation insurance pays for medical bills and lost wages if an employee is injured or becomes ill while working. It typically also protects the business from employee lawsuits related to the injury. 
• Commercial auto insurance: Commercial auto insurance covers medical bills and repairs to property for the other party in an accident, and can also pay for injuries to the driver and physical damage to the vehicle owned by the business
• Hired and non-owned vehicle insurance: Works like commercial auto insurance, except that it covers personal or rented vehicles operated for business purposes
• Inland marine insurance: Covers inventory and equipment you transport to job sites or ship to customers
• Cyber liability insurance: Cyber liability insurance covers liabilities, recovery of reputation and lost data, lost business income, and other consequences of a cyber breach

How To Save Money on Business Insurance

1. Compare quotes: Some insurance providers may offer the coverage you need for less than others. So it’s important to compare business insurance quotes on a site like Tivly before choosing a company. However, bear in mind that price isn’t the only consideration. Make sure the company has good financial strength and customer satisfaction ratings.  
2. Bundle your coverages: Many insurers offer bundling discounts when you buy two or more policies. You can also save by buying pre-packaged coverages, like the business owner’s policy. 
3. Opt for a higher deductible: The deductible you choose represents your share of the financial responsibility for a claim. Choosing a higher deductible means you’ll have greater out-of-pocket expenses if a loss occurs, but it can save you money on your monthly premiums. 
4. Be proactive about preventing losses: Since your claims history can affect your premiums, you should take steps to limit your risk. Your insurance company will likely have resources available and may even provide training to help your business prevent costly incidents. 
5. Update your coverage as needed: Keep your insurance company informed about changes to your business. If you expand your service area, hire more employees, or acquire another entity, you’ll likely need to add more coverage to protect your business. If you need to lay off employees or close down a location, you should also update your coverage to save money on your premiums. 

How Much Is Liability Insurance for a Business?

The cost of liability insurance for a small business varies depending on the type of work your business performs, where your business operates, your past claims history, and the limits you choose for your policy. Some small, low-risk businesses may pay $200 or even less per year for general liability insurance and $300 or less per year for professional liability insurance.

How Much Insurance Coverage Should a Business Have?

The Small Business Administration suggests that businesses buy business insurance for anything they wouldn’t be able to cover on their own. The U.S. Chamber of Commerce notes that you should insure the full value of your business property and buy enough liability coverage to protect your assets, which means you’ll need higher limits for a sole proprietorship and less liability coverage for an LLC. One of the most popular options for small businesses is a business owner’s policy (BOP) with $1 million in coverage per occurrence for general liability coverage and a $2 million aggregate.

Is Business Insurance Required?

Legal insurance requirements for businesses vary depending on the industry and the city and state where you operate. For most businesses with employees, workers’ compensation insurance is required. For businesses that own vehicles and drive or park them on public roads, commercial auto insurance is required. Professional liability insurance is mandatory for legal and medical professionals in some states.

Is Business Insurance Tax-Deductible?

Generally, yes. IRS Publication 535 lists several types of business insurance that you can deduct from your taxable income, including commercial property insurance, health insurance for employees, general and professional liability insurance, workers’ compensation insurance, and business interruption insurance. However, you can’t deduct certain life insurance and annuity premiums, nor can you deduct self-insurance reserve funds.

What Is a Business Owner’s Policy?

A business owner’s policy is a package of small business insurance coverages that may vary from one insurer to the next but generally includes commercial property insurance, general liability insurance, and business interruption coverage. A BOP will not cover professional liability insurance; you’ll have to buy that coverage separately.

Do I Need International Business Insurance?

If your business operates in foreign countries, you’ll likely need international business insurance since most policies won’t cover events that occur overseas. Whether you have international employees, customers, or suppliers, your exposure to global liability risks makes it essential to purchase a global insurance policy or multinational endorsement.

Read the original article on Investopedia.