Your business insurance cost will vary greatly depending on the type of business and the amount of coverage you need.
Your small business insurance cost can be as low as $400 per year, but the average small business liability insurance costs are around $750 - $1,000 per year.
Read our How Much Is Business Insurance guide to decode the average cost for business insurance for your company.
Recommended: Get the protection you need with a dedicated small business insurance provider like Next Insurance
How Much Does Small Business Insurance Cost?
How much does small business insurance cost? According to Progressive, the median cost of a business insurance policy for new customers in 2021 “ranged from $42 for professional liability to $68 for a business owners policy (BOP).” Different insurance companies have different average costs based on their professional liability policy limits, your risk exposure, other specific risks, and other factors.
Other figures offered by Progressive include:
- General Liability Insurance: $48/month median; $65/month average
- Business Owner’s Policy (BOP): $68/month median; $101/month average
- Workers’ Compensation: $65/month median; $111/month average
- Professional Liability Insurance: $42/month median; $56/month average
Small business insurance cost varies quite a bit depending on the type of insurance coverage because of the protection each policy offers. Workers’ compensation claims can cost the insurer quite a bit more than professional liability claims over time, for instance.
The median or average cost of business insurance is nice to know, but it won’t tell you how much small business liability insurance will be for your business. Small business owners will need to get a quote from an insurance company. The insurance company will look at a variety of factors to determine your rate, including profession, the number of employees, coverage needs, your normal business operations, claims history, other business insurance coverages, and more.
Factors Affecting Business Insurance Costs
It is unlikely that you will pay the exact average cost of business insurance, as too many variables can push your rate higher or lower. These include:
Insurance companies are quite specific in their risk assessment of different businesses. For example, when calculating workers’ compensation coverage, insurers will examine each job function and the potential risks of that job.
A flower shop is going to pay less for insurance than a construction company, as the risks involved in the company’s daily operations are significantly different. While a flower shop employee can be injured on the job, injuries are less common or extreme than those working with heavy equipment and power tools.
Payroll and Sales
According to the National Academy of Social Insurance, the average cost of workers’ compensation insurance is around $0.70 to $2.25 per month for each $100 of payroll your business has. The higher your payroll, the higher your workers’ compensation insurance premiums are going to be. Small businesses should be aware that insurers take into consideration whether or not you have few or no employees when providing quotes.
As your sales increase, you can also expect insurance providers to charge more. Insurers increase the rate of general liability insurance based on your total sales. They argue that the more selling you do, the more likely you are to have an angry or injured customer that will sue your business.
Small business insurance costs change based on location. Depending on where your business operates, you may be more or less likely to experience problems like natural disasters, theft, and other issues that lead to claims. The location also plays a big part in the cost of workers’ compensation insurance due to the different state law requirements. Some states require you to carry better coverage for your employees.
Commercial auto insurance also changes based on location. For example, operating commercial vehicles (e.g., professional services like taxi drivers) in cities can lead to more claims. Commercial auto insurance cost also varies based on your insurance provider, bodily injury policy limits, and liability coverage limits. You can expect to pay much more than you do for your personal auto policy.
A solo entrepreneur (or “solopreneur”) will need significantly less insurance than a company with 1,000 employees. The bigger your business, the more property you have and the more employees you utilize. It’s not surprising that larger businesses have larger insurance bills. Ideally, their increased revenues make up for the increased costs.
Coverage and Deductibles
If you’ve ever purchased an insurance policy, you already know you have a wide array of options to choose from. The more coverage you have, the more it costs. The lower your deductible, the more it costs. So, if your business needs better coverage, lower deductibles, or both, you can expect to pay more.
For example, a business could get a small business policy that has a $1 million/$1 million aggregate limit. That means it could claim up to $1 million per incident and up to $1 million per year. If it needed more than $1 million in a year, the claim would be denied. Or, it could get a $1 million/$2 million aggregate limit. That means it could claim $1 million per incident and up to $2 million a year.
The cost for the $1 million/$1 million policy would be cheaper than the $1 million/$2 million policy. It’s up to each business to decide how much coverage it needs and how much it wants to pay.
Insurance companies keep excellent records. If you have prior liability insurance claims, insurance companies will know about them, and they will consider them when calculating your rates. The more claims you have on your record, the more you can expect them to raise your insurance rates.
Learn What Business Insurance Will Cost You
Hopefully, your small business insurance cost won’t be much higher than average, but the only way to know is to talk to an insurance agent.
Get a free quote now from Next Insurance to find out what your actual business insurance cost will be.
Save Money on Business Insurance Cost By Having a Risk Management Plan
A risk management plan (RMP) is a written document that describes how a company will identify, assess, and respond to potential risks associated with its products and services. The plan typically includes a description of the company's risk assessment methodology, as well as specific procedures for responding to identified risks.
A risk management plan is an important part of any business, as it can help to save money on business insurance costs. A risk management plan helps identify and assess potential risks to the business, and then puts in place steps to reduce or eliminate those risks. This can include things like safety measures in the workplace, insurance policies, and emergency plans.
Having a risk management plan in place can help businesses save money on their insurance premiums, as insurers will see that the business is taking steps to protect itself from potential losses.
Frequently Asked Questions
What is the average cost of business insurance?
According to Progressive Insurance, the average cost of general liability insurance for new business customers was $65/month in 2021.
Business insurance cost is highly variable, though, and is based on multiple factors specific to each business.
How much is business insurance?
The price of business insurance depends on the specific business you cooperate with, including the business size, location, industry, number of employees, coverage needs, prior claims, and more.
Is business insurance expensive?
Business insurance isn’t expensive when compared to the cost of having no business insurance. For the price of business insurance, you get coverage for things like lawsuits, property damage, employee injuries, and more.
The right insurance coverage will ensure you can recover from accidents, disasters, injuries, and other hurdles that could otherwise put you out of business.
What are the types of business insurance?
The main types of business insurance are general liability insurance (liability coverage), professional liability insurance, business owners' policy, commercial property insurance, commercial auto policy, omissions insurance, and personal injury.
How much does general liability insurance cost?
The cost of professional liability insurance varies depending on the company and the amount of coverage. A business can expect to pay between $500 and $5,000 per year for general liability insurance.