How Much Does Business Insurance Cost?

There is not an easy answer to the cost of business insurance. However, averages and an understanding of how insurance cost works can help you better estimate your future insurance expense.

When you are starting a small business, you might wonder, “How much does business insurance cost?” The correct answer to those questions depends on what industry you are in, what type of business you run, and what the specific risks you take are. However, you can get a pretty good idea of the average cost of business insurance is by looking at past data and trends.

What Effects Business Insurance Cost?

There are some factors that your small business could change or have that would affect the total cost of your insurance policy. Each of these could have positive effects or negative.

  • Industry – The industry that you work in will affect the cost of your insurance. This is based off the risk that you create by being in business. Contractors in the construction industry will have to deal with much higher insurance costs than a consultant with an in-home business.
  • Type of Policy – This one is the most obvious factor. General Liability Insurance is one of the least expensive kinds of coverage that a business can get. On the other hand, commercial auto insurance can run your hundreds more a month depending on a variety of factors.
  • Policy Limit – When you purchase insurance coverage, you will have the ability to decide the coverage limit you need or want. How much coverage you buy will affect your business accordingly. If you decide that you need a Professional Liability Insurance policy, you could choose a $250,000 limit or a $500,000 for two examples. If you want the earlier one, your average cost will be less than the later option.
  • Deductible – Just like your personal insurance, the lower the deductible you have to pay, the higher the cost of the coverage will be. Though you can choose to have business insurance that has no deductible, this will result in a very high cost of insurance per month depending on the policy and company. If you are looking to lower your insurance costs, many times a higher deductible can help with this.
  • Business Size – If you are looking at General Liability Insurance and Property Insurance then you might need to know the size of the building you use for business purposes. If you have a whole warehouse, you expect to pay more than someone with a home office due to the protection you will need.
  • The number of employees – If you are thinking about buying Workers’ Compensation Insurance, Professional Liability Insurance, and General Liability Insurance you will need to know how many people you employ and need to cover. More workers mean more potential for bodily injury, property damage, and risk management. As you hire more people to work for you, your business insurance will rise to cover each of them, thereby increasing the business insurance costs.
  • Location – Your business’s physical location is as important as the business size. If you are living in a small city, for example, Forsyth, Georgia you might pay a lot less for your business insurance costs than if you were in a big city, for example, New York City, New York.
  • Annual Revenue – This factor is based on how much the insurance has to protect. For example, if you make about $10,000 a year, you won’t be paying nearly as much as a company that makes $1,000,000 a year.

Details: How Policy Type Affects Cost?

What type of coverage you purchase will affect the cost of your insurance policy. As mentioned above, a commercial auto insurance policy will cost more than other brands. This should be unsurprising. Thinking to cars as an example, an SUV often costs more than a four-door sedan. Each has its purpose and features, and it wouldn’t make sense for them to be the same price. In the business insurance world, this difference is the protections that they provide.

When you cover a vehicle, you are covering the chance that someone could do something to your car or you as well as the fact that you could do the same to someone else. This doesn’t include the optional coverages for hail or accidental damages. On the other hand, someone looking for protection of their home office has a single room to protect. An office is much safer than what could be a half ton wrecking ball on the road in the eyes of the insurance agency.

How Much Does Small Business Insurance Cost?

If you average all the above factors, you end up with a very wide average. However, in general, a small business can expect to spend about $1,281 on their insurance policies and coverages. This is great news for most business owners because that means that many business owners still see monthly prices around $100 a month. $100 a month is a very affordable price for most businesses.

However, this number should in some ways be taken only for informational purposes. Business insurance coverage is a complicated subject depending on the type of insurance, and other factors previously walked about. Should you be an expensive outlier, you can expect to pay hundreds of dollars more a month due to the higher risk that your small business presents.

It’s always a great idea to simply get free quotes on business liability insurance cost to begin. This is the base insurance for most businesses and will give you an idea of what you can expect to start with. Talking to an insurance agency about the specifics of your business will help to further come to an understanding of what to expect and what types of coverage will be needed.

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