How Much Does Business Insurance Cost?

While running a business can be rewarding, it also comes with a myriad of risks that could financially cripple your company. For example, lawsuits related to product liability can quickly empty your business’s bank account. According to the Insurance Information Institute, the median product liability lawsuit settlement was nearly $4 million in 2020.

By investing in a business insurance policy, you can protect your company financially  from losses caused by not only defective products but also professional errors, natural disasters, property damage, bodily injuries and other potential hazards. Business insurance can cost anywhere from $15 to $125 a month, depending on factors like your industry, business location, number of employers, prior claims history and policy type. 

What factors affect your business insurance costs?

Your business insurance rate typically comes down to a few key factors, including the following:

• Number of employees: The more employees you have, the higher the chance of accidents and the greater the likelihood of claims. So, if you have a larger business, expect to pay more for business insurance than companies with few or no employees. 
• Business location: If your business is located in an area prone to natural disasters like hurricanes, earthquakes or floods, you may have to shell out higher premiums to cover potential property damage. And if your business is in a high-crime area, the increased possibility of theft or vandalism could also negatively affect your rates. 
• Building size and age: Larger and older buildings typically cost more to insure than newer and smaller ones. 
• Industry: Some industries are inherently riskier than others and require extensive insurance coverage. For example, a construction company faces more risks related to workplace accidents and life-threatening injuries compared to a consulting firm. 
• Prior claims history: A history of frequent claims or large settlements is a red flag for insurers. It shows that your company is not taking the proper safety measures to mitigate risk and could be a future liability to the insurer. 
• Policy details: Policy details like your coverage limits and deductibles can also affect the affordability of your business insurance. Generally, the higher the coverage limit, the higher the monthly premium. On the other hand, higher deductibles typically come with lower premiums. 

Average small business costs

Here’s a breakdown of some common types of small business insurance costs:

• General liability insurance: General liability insurance protects you and your business if you’re found legally liable for bodily injuries or property damage. For example, if a customer slips on a wet floor at your store and breaks their arm, general liability insurance would cover their medical expenses. 
• Professional liability insurance: Also known as errors and omissions insurance, professional liability insurance protects businesses if their employees make a mistake while providing professional advice or services. Examples of businesses that may need this type of coverage include accounting firms, consulting agencies, and real estate firms. 
• Workers’ compensation insurance: Workers’ compensation insurance provides wage benefits to employees who are injured or become ill on the job. It can also help with medical and hospital expenses. 
• Commercial umbrella insurance: Commercial umbrella insurance complements your other liability coverages by covering the outstanding costs when your other liability coverage limits have been reached. It can help pay for legal expenses, medical bills, court judgments and settlements, third-party property damage, etc. 
• Cyber liability insurance: Cyber liability insurance helps protect your business against financial losses resulting from internet-based threats such as data breaches or malicious cyber hacks. 
• Commercial auto insurance: Commercial auto insurance covers damage to a company vehicle and bodily injuries when you or your employees use the car for business. 
• Business owner’s policy (BOP): This policy combines general liability insurance, commercial property insurance, and business interruption insurance into one and is generally more affordable than purchasing each policy separately. 

Note that depending on the type of business you own, you may not need every kind of coverage. However, in some cases, you might be legally required to purchase certain types of business insurance. Talk to a licensed business insurance agent or broker who can help tailor a plan that fits the unique needs of your company.

How to lower small business insurance costs

Business insurance can be a significant expense, especially for small businesses that have yet to break even. Here are some tips to lower your business insurance costs. 

• Shop around: Rates often vary from one insurer to another. Always compare quotes from multiple insurance companies before committing to one. 
• Bundle multiple policies: For example, a business owner policy (BOP) bundles three coverage types: General liability insurance, commercial property insurance, and business interruption insurance, and is typically cheaper than buying three policies separately. 
• Pay your premiums annually: Insurers typically offer discounts if you pay your premiums annually instead of monthly.
• Raise your deductible: A higher deductible typically results in a lower premium. So, if you can afford the out-of-pocket costs when you file a claim, consider raising your deductible to save on premiums. 
• Avoid risks that could lead to a claim: Consider offering formal safety training in the workplace to minimize your risk profile and lower the probability of filing a claim. 

Where to get small business insurance?

You can find plenty of business insurance options online to safeguard the company you’ve worked so hard to build. 

For example, Next provides general liability insurance that costs as little as $11 a month. They also offer other policies like professional liability insurance which starts at $18.34 a month. Remember, the exact cost depends on factors like your business type and industry, so make sure you get a quote to see whether it’s within your budget. 

Our curated list of the best small business insurance companies is also a great place to start when exploring your options. We evaluated each company on their coverages offered, independent ratings, and overall ease of use. Plus, most of these insurers offer coverage selection tools on their website to help you understand your business’s coverage needs.

If you need personalized help finding a suitable policy, consider consulting a licensed insurance agent. But keep in mind that agents receive commissions from insurance companies when they sell policies, which could influence their recommendations. So, always perform your due diligence and exercise your best judgment before making a decision.