On average, small business insurance costs amount to roughly $30 to $340 per month, but this figure can be higher or lower depending on certain factors, including the size and location of your business, policy limits and deductibles as well as the type of business insurance coverage you choose. Typically, if you bundle your business insurance policies issued by the same insurance company, you may be able to save money each month.
How Do Insurers Determine Small Business Insurance Costs?
When considering your small business insurance costs, remember there are many different types of business insurance policies to consider. They each provide coverage for different types of claims and losses. Some of the most common types of business insurance include:
- Commercial General Liability Insurance
- Business Owner’s Policy
- Commercial Property Insurance
- Workers’ Compensation Insurance
- Business Interruption Insurance
- Commercial Auto Insurance
- Cyber Liability Insurance
- Inland Marine Insurance
Let's look at the some of the factors affecting the cost of these common business insurance types.
Commercial General Liability Insurance Cost
Commercial general liability insurance for a small business typically helps protect a company against claims made by customers and other third parties alleging property damage, bodily injury, and/or advertising injury caused by the business or its employees. These claims can arise due to the damages caused by the business’s operations, and services or products provided by the business, among other things. Without adequate commercial general liability insurance coverage, a business could end up having to compensate third parties out of pocket. It is possible that a company could even go bankrupt if it is financially liable for such damages or losses and does not maintain proper commercial general liability insurance coverage.
Considered a core type of small business insurance coverage, commercial general liability insurance only provides coverage for certain losses. A business may need additional insurance coverage for losses caused by vandalism, fire or theft, among other things. In general, a business typically obtains commercial general liability insurance if it:
- Is open to the public.
- Utilizes social media.
- Creates marketing materials to advertise the business.
- Uses third-party locations to conduct business.
- Hires temporary employees.
Commercial general liability insurance isn’t typically required by law, but it can be a great risk management tool to consider.
The actual cost of a commercial general liability insurance policy will vary based on many different factors, including, but not limited to the type of risk, the size and location of a business, claim history and policy limits/deductibles. Companies in industries with high risk of third-party damages or losses can expect to spend more, and so can companies that have filed insurance claims in the past. Commercial general liability insurance can be combined with other types of insurance policies or can be purchased on its own.
Business Owner’s Policy Cost
A Business Owner's Policy (BOP) is a convenient business insurance solution tailored for small to medium-sized businesses, offering a bundled package that typically combines coverages such as business property insurance, commercial general liability insurance and business interruption insurance, into a single policy.
In addition to the convenience of combining these types of coverages, BOP insurance can also be less expensive than purchasing the coverages separately, depending on the coverage options selected. BOP insurance is a common choice for business owners who prefer to combine liability and property coverages into one policy.
The cost of a BOP will vary based on certain factors such as, the type of risk, the size and location of a business, claim history, policy limits/deductibles and the type of insurance coverage(s) chosen.
Commercial Property Insurance Cost
Commercial property insurance typically covers losses caused by theft of or damages to the business property and other assets. There are certain risks associated with maintaining a physical business location, so it is important to consider purchasing commercial property insurance coverage in case a pipe bursts or fire damages the business property or other assets. If a business rents space, the landlord may require the business to maintain this type of coverage. Commercial property insurance is also important if a business owns expensive tools, equipment or other assets.
Commercial property typically insurance covers losses to:
- Buildings (owned or rented)
- Supplies and equipment
- Furniture and fixtures
The cost of a commercial property insurance policy depends on factors, including the nature and size of the business, type of risk, location of a business, claim history and policy limits/deductibles.
Workers’ Compensation Cost
Businesses that hire employees are typically legally responsible for maintaining workers’ compensation insurance which can help pay for medical bills and lost wages if an employee is injured on the job or suffers an illness as a result of working on the job. States that require businesses to maintain workers’ compensation insurance have different requirements, so it is important to research state requirements.
Some states require businesses to purchase workers’ compensation insurance policies from a state insurance fund, while other states allow businesses the option of purchasing workers’ compensation insurance policies from either a private insurance company or a state fund. It is important to note, however, that private insurers have the right to reject applicants based on certain criteria. It is estimated that a business will pay $1.19 for every $100 in payroll for workers’ compensation insurance but the actual cost will vary depending upon a number of factors including, but not limited to, type of industry, payroll, claim history and state laws.
Business Interruption Insurance Cost
Business interruption insurance, sometimes referred to as business income insurance, helps cover the loss of business income for periods of suspended operations. The suspended operations must be caused by a covered event, such as a fire to qualify for coverage. Business interruption insurance coverage can help companies pay for fixed expenses, including repairs made while the business is closed if the loss is caused by a covered event. Business owners may also be compensated for wages that would have been earned if the business was operational. The cost of business interruption insurance can vary depending on a number of factors including, but not limited to, the type and size of the business, location, revenue, and coverage limits/deductibles.
Commercial Auto Insurance Cost
Commercial auto insurance policies provide coverage for vehicles used for business purposes. This can include cars, trucks, vans, and other vehicles used for commercial purposes. The coverage typically includes liability protection for bodily injury and property damage, as well as coverage for physical damage to the vehicle itself. It is important for businesses that use vehicles to have commercial auto insurance to help protect themselves and their assets in the event of an accident or other incident. The cost of a commercial auto policy will vary based on many different factors, including, but not limited to the type of risk, the size and location of a business, claim history and policy limits/deductibles.
Cyber Liability Insurance Cost
Losses caused by cyberattacks and data breaches may be covered under cyber liability insurance policies. The cost of coverage depends on many factors, including but not limited to how sensitive the data is and how much sensitive data a company has access to. The policy limits and deductibles will also impact a small business’s insurance costs.
Inland Marine Insurance Cost
Inland marine insurance can help protect against losses to business assets when they are stored at a third-party location or are transported over land. Coverage typically helps to protect against losses to high-value assets stored at a fixed location that other types of insurance do not cover. The cost of an inland marine insurance policy will vary based on many different factors, including, but not limited to type and value of property/equipment, claim history, risk factors and policy limits/deductibles.
Factors That Affect Small Business Insurance Costs
Small business insurance costs are affected by many key factors, including:
- Industry- Industries and professions with high risk of third-party damages or losses typically have to pay higher premiums for insurance coverage.
- Coverage limits- Generally, the premiums are higher for insurance policies with high coverage limits.
- Location- Minimum coverage requirements under state law can affect the amount of premium.
- Company size- A larger company will generally need greater coverage, increasing the cost of insurance policies.
- Prior claims- The number and amount of insurance claims a business has filed in the past also generally affect the cost of insurance policies. Typically, the more claims the business has filed, the riskier the business may be determined to be by insurance companies, potentially resulting in higher insurance premiums.
- Payroll and sales- Workers’ compensation insurance will increase or decrease with payroll size.
How to Lower the Costs of Small Business Insurance
Fortunately, there are ways to help lower small business insurance costs. By buying a Business Owner's Policy, which combines commercial general liability and commercial property insurance, a small business may be able to experience lower premiums than if the coverages were purchased separately. Shopping around, comparing quotes from various insurers, and choosing the policy within the business’s budget can also help. Purchasing an insurance policy with a higher deductible can also lower the amount of premiums. Investing in workplace safety and encouraging employees to avoid accidents is another way to help lower the cost of business insurance policies.
How to Obtain Small Business Insurance
By researching and comparing available insurance policies and bundles, a business can get a better idea of the costs for insurance coverage. If you are like many small business owners, you may be wondering where your business can purchase an insurance policy. Let Acrisure help you find the coverage that is right for your business and answer any questions you may have. Contact us today for help with finding an insurance solution that fits your small business’s budget and needs or request a small business insurance quote online now.