The cost of general liability insurance depends on several factors related to your business. Key elements that influence your premium include your industry, location, policy limits, and other specific details about your operations.
Key Takeaways
The average cost of a business owner's policy for a small business is $57 per month or $684 annually. This type of policy can help you save money by combining three different types of coverage into one more affordable package.
The cost of small business insurance varies depending on factors like your industry, the nature of your operations, business size, number of employees, revenue, and claims history.
To secure the best deal, it’s wise to shop around and compare quotes from multiple insurance providers.
Average Cost of Insurance for a Small Business
On average, a business owner's policy for small business insurance costs about $57 per month. However, the amount you pay could be significantly higher or lower depending on the specific types of insurance you choose. Below is a cost breakdown of some common insurance options that small business owners might consider.
General Liability Insurance Cost
According to Insureon, general liability insurance typically costs around $42 per month. This insurance covers your business in case of lawsuits or claims arising from injuries to others or damage to their property for which your business may be responsible.
Several factors play a significant role in determining your general liability insurance premiums:
- Building size: Larger facilities often come with more risks, including a higher likelihood of accidents, leading to potentially higher premiums if your business operates in a bigger space with more foot traffic.
- Location: If your business is in a high-risk area, such as one with a higher crime rate, you may face higher liability insurance costs.
- Size of payroll and annual revenue: Businesses with higher expenses or operating costs see higher insurance premiums, as they may be seen as riskier to insure.
- Claims history: A history of filing general liability claims can lead to increased premiums.
- Policy details: The specifics of your policy, such as coverage limits and deductibles, significantly impact your insurance costs.
Coverage limits include the per-occurrence limit, which is the maximum the insurance company will pay for a single claim, and the aggregate limit, the maximum payout over the policy period.
Product Liability Insurance Cost
Product liability insurance typically costs around $42 per month or $500 annually, according to Insureon.
This insurance, often included in general liability policies, primarily bases its premiums on the number of lawsuits associated with your products or services, though other factors are also considered.
Commercial Property Insurance Cost
The average cost for commercial property insurance is about $67 per month, based on a standard policy with a $60,000 coverage limit and a $1,000 deductible, according to Insureon.
This insurance protects your business from financial losses if your property is stolen, damaged by fire, or impacted by a natural disaster.
The cost of commercial property insurance can be influenced by several factors:
- Location: Businesses in areas prone to natural disasters often face higher premiums
- Building age and size: Older or larger buildings generally cost more to insure compared to newer, smaller buildings
- Types of fire protection: Having fire prevention measures like sprinkler systems, alarms, and proximity to a fire department can help reduce your premiums
- Equipment costs: If your business houses expensive equipment, you can expect to pay more for commercial property insurance, as it covers the replacement or repair of such items
- Types of perils covered: Similar to home insurance, your premiums will increase if you need to cover additional risks, such as floods, earthquakes, or employee theft
Business Owners Policy Cost
According to Insureon, a business owner's policy (BOP) typically costs $57 per month or $684 per year on average.
A BOP combines general liability insurance, commercial property insurance, and business interruption insurance into one package, usually at a lower rate than purchasing each policy separately.
Several factors influence the cost of a BOP, similar to what affects general liability and commercial property insurance:
- Building age and size: Older or larger buildings generally cost more to insure compared to newer, smaller structures
- Location: Businesses located in high-risk areas prone to natural disasters often face higher premiums
- Types of fire protection: Having fire safety measures like sprinkler systems, alarms, and close proximity to a fire department can help lower your insurance costs
- Equipment costs: Businesses with expensive equipment may pay more for a BOP to ensure adequate coverage
- Types of perils covered: If you need coverage for additional risks, such as floods, earthquakes, or employee theft, your premiums will be higher
- Policy details: Factors such as coverage limits, deductibles, and other policy specifics will affect the overall cost of your business insurance
Business Interruption Insurance Cost
Business interruption insurance compensates you for lost income and operating expenses if your business must temporarily close due to a covered event. This coverage can include lost revenue, rent or mortgage payments, loan payments, taxes, payroll, relocation costs, and training expenses.
Three main factors influence the cost of business interruption insurance:
- Revenue: Since this insurance covers lost income, higher revenue typically means higher premiums.
- Industry: Some industries, such as restaurants, are more prone to property damage and therefore face higher premiums for business interruption insurance.
- Your business’s property value: The higher the value of your commercial property, the more you’ll pay for business interruption insurance.
Inland Marine Insurance Cost
Inland marine insurance costs about $29 per month or $350 per year, based on a median coverage limit of $5,000, according to Insureon.
This insurance covers your business if your property or products are damaged or lost while in transit. This could involve goods being shipped or equipment used for work purposes, such as lawnmowers or camera gear.
The primary factor affecting the cost of inland marine insurance is the value of the equipment or products being transported. Businesses with expensive items in transit can expect to pay higher premiums.
Cyber Liability Insurance Cost
Cyber liability insurance for small business owners averages $145 per month, or $1,740 per year, according to Insureon.
A typical cyber insurance policy might include a $1 million per occurrence limit, a $1 million aggregate limit, and a $1,000 deductible.
Cyber liability insurance provides financial protection if your business suffers a cyberattack. It can cover the costs of repairing or rebuilding your business, as well as legal fees and settlements related to the breach.
Several factors influence the cost of cyber insurance:
- Industry: Businesses with higher exposure to cyber risks may need more extensive coverage, leading to higher premiums.
- Your company’s revenue and costs: Higher revenue and operating costs typically lead to higher insurance premiums.
- Network Security: The strength of your network security practices, or the lack thereof, can significantly impact your cyber insurance costs.
- Access to Systems and Data: The more people who have access to your business systems and data, the higher the risk and the associated premiums.
- Your claims history: If your business has filed cyber insurance claims in the past, it may lead to higher premiums in the future.
Workers’ Compensation Insurance Cost
According to Insureon, workers’ compensation insurance costs an average of $45 per month or $542 per year for businesses with payrolls under $300,000.
Workers’ compensation insurance supports employees who are injured on the job. It typically covers medical expenses, lost wages, and other related costs.
In most states, having workers' compensation insurance is legally required if you have at least one employee. However, the specific laws vary by state. For example, in Alabama, it’s not required if you have fewer than five employees, and in Arkansas, it's not mandatory if you have fewer than three employees. Texas and Wyoming don’t require workers' compensation insurance at all.
The cost of workers’ compensation insurance is influenced by several factors:
- Payroll size: Larger businesses with higher payrolls generally pay more for workers' compensation insurance.
- Employee job duties: Jobs with higher risk, such as construction or mechanical work, result in higher premiums compared to lower-risk jobs like office work.
- Location: In monopolistic states like North Dakota, Ohio, Wyoming, and Washington, you’re required to purchase workers' compensation insurance through state-funded programs, leaving no option to shop around. In other states, you can obtain quotes from private insurers.
Commercial Auto Insurance Cost
Small businesses typically pay an average of $147 per month, or $1,762 annually, for commercial auto insurance.
The cost of commercial auto insurance is mainly determined by:
- Industry: The inherent risks associated with your industry will affect your insurance premiums.
- The Fleet: The number and types of vehicles your business uses will impact costs.
- Driving Operations: The frequency with which your business vehicles are driven is a factor in determining rates.
- Driving Records: The driving records of both you and your employees will influence your risk level and insurance costs.
- Claims History: Your previous auto insurance claims history will be considered in setting your rates.
Commercial Umbrella Insurance Cost
On average, small businesses pay $75 per month, or $900 annually, for a commercial umbrella insurance policy, according to Insureon.
Commercial umbrella insurance provides additional liability coverage once you’ve reached the limits of your existing liability policies. The cost is mainly influenced by:
- Industry. The type of business you operate and whether it’s open to the public impacts the level of risk.
- Coverage. The more coverage you purchase, the higher your premium will be.
- Errors & Omissions Insurance Cost
- Errors & Omissions (E&O) insurance, also known as professional liability insurance, costs an average of $61 per month, or $732 per year, according to Insureon.
E&O insurance covers legal costs and settlements if a customer sues your business over unsatisfactory work. The cost of E&O insurance is influenced by:
- Industry: The risk level of your industry plays a significant role in determining premiums
- Coverage details: The coverage limits and deductibles you choose will directly affect the cost
- Business size: Larger businesses typically face higher insurance costs
- Business operations: The nature of your day-to-day operations can affect the likelihood of lawsuits, influencing your premium
- Claims history: A history of liability claims increases your risk level and, consequently, your insurance costs
Contractor’s Tools and Equipment Insurance Cost
According to Insureon, contractor tools and equipment insurance typically costs around $14 per month, or $168 annually.
This type of insurance covers the repair or replacement of your tools in cases of theft, loss, or damage. The cost of your policy will vary based on several factors:
- Industry: The level of risk associated with your business is heavily influenced by the industry you operate in
- Tools and equipment value: Higher-value tools and equipment require more coverage, which increases costs
- Frequency of Movement: If your tools and equipment are frequently transported, the likelihood of damage or loss is higher, leading to increased premiums
- Coverage type: Whether you choose named perils or open perils coverage will affect your premium, with open perils generally being more expensive
- Coverage Details: Elements like policy limits, deductibles, and additional options will also impact your insurance costs
- Method of Property Valuation: The way your tools and equipment are valued (such as replacement cost or actual cash value) will influence your insurance premiums
Small Business Insurance Frequently Asked Questions
Below are answers to some frequently asked questions about small business insurance.
How Do I Calculate My Small Business Insurance Premium?
To estimate your small business insurance premium, you'll need to gather specific details about your business, such as:
- The type of business you operate
- The number of employees you have
- Your gross annual sales
What Is the Best Type of Insurance for a Small Business?
There isn't a one-size-fits-all solution for business insurance since every business has its own unique requirements. A good insurance policy allows you to customize your coverage to best suit your business needs.
Many small business owners opt for a Business Owner’s Policy (BOP) as a starting point because it combines three essential coverages, protection against bodily injury claims, property damage, and lost income.
Do I Need Insurance for My Small Business?
If you’re asking, "Do I need insurance for my small business?" The answer is generally yes. Most states require small businesses to carry certain types of insurance, especially if they have employees or use commercial vehicles.
It’s crucial to understand your state’s regulations and the specific risks associated with your industry.
The Bottom Line
Regarding small business insurance, the cheapest option isn’t always the best. While cost is an important consideration, it shouldn’t be the sole factor guiding your decision.
The most critical aspect of purchasing small business insurance is finding a provider that offers coverage tailored to your specific needs. For instance, you'll need cyber liability insurance if your business handles sensitive data like Social Security numbers or credit card information.
Similarly, if you own valuable tools, look for a provider that offers tools and equipment insurance.
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