The average monthly cost of small business insurance ranges from $30 to $340 per month or $360 to $4000 annually, depending on your coverage type.
However, several factors can influence how much you’ll pay to insure your business.
By the end of this article, you’ll better grasp what you can expect to pay for your business insurance, the factors affecting insurance costs and how to lower your costs.
So, let’s dive in!
Table of Contents
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Business Insurance Cost at a Glance
As earlier stated, businesses spend an average of $30 to $4000 annually for insurance.
However, these costs depend on your choice of coverage options, which we’ll breakdown in a bit, but here’s an overview of what to expect when seeking insurance:
|Type of policy||Average monthly cost||Average annual cost|
|Business interruption insurance||$40||$480|
|General liability insurance||$30||$360|
|Commercial property insurance||$63 (median)||$756 (median)|
|Inland marine insurance||$14 (median)||$168 (median)|
|Cyber liability insurance||$123||$1,485|
|Total average costs||$340||$4,090|
How Insurance Companies Determine Insurance Premiums for Small Businesses
Insurance companies use various factors to determine insurance premiums for small businesses.
Some of the most common ones include:
- Business type and industry: Higher-risk businesses attract higher premiums.
- Business size: Larger businesses may pay more due to the increased risk of liability claims and property damage.
- Location: Businesses in high crime or disaster-prone areas may pay higher premiums.
- Claims history: Businesses with a history of claims may be considered higher risk and pay higher premiums.
- Coverage limits and deductibles: Higher coverage limits and lower deductibles result in higher premiums.
- Risk management practices: Businesses with effective safety protocols and risk management strategies may be eligible for lower premiums.
Insurers determine the risk levels associated with insuring a business and set premiums accordingly.
Risk levels associated with a business also largely depend on the industry.
This begs the question, “How much should small business insurance cost in various industries?”
Here’s a breakdown of various Industry-specific insurance rates:
- Professional liability coverage: $55 monthly or $665 annually)
- General liability policy: $30 monthly or $390 annually
- Cyber liability insurance: 140 monthly, or $1,675 annually
- Workers’ compensation: $50 monthly or $620 annually
- Business Owner Policy: $45 monthly or $520 annually
- Commercial auto insurance: $142 monthly or $1,704 annually
- General liability policy: $60 monthly or $710 annually
- Cyber liability insurance: 140 monthly, or $1,675 annually
- Workers’ compensation: $260 monthly or $3150 annually
- Contractor’s tools and equipment insurance: $15 monthly or $170 annually
- Commercial auto insurance: $150 monthly or $1,810 annually
- Professional liability coverage: varies depending on your specialty
- General liability policy: $30 monthly or $350 annually
- Cyber liability insurance: usually depends on how much sensitive patient information you handle
- Workers’ compensation: $60 monthly or $740 annually
- Business Owner Policy: $55 monthly or $625 annually
Bear in mind that some insurance coverages are exclusive to specific industries.
Now, let’s discuss the average costs of some of the most common insurance coverages.
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How Much Does General Liability Insurance Cost?
General liability insurance can protect small businesses from external and internal factors that could negatively impact their operations.
- Lawsuits or claims
- Injuries on the business property, and
- Damages to someone else’s property.
On average, general liability insurance costs around $30 per month and $360 annually.
We also discovered that 95 percent of business owners pay less than $50 monthly, and only one percent spend more than $100.
What is the Cost of Commercial Property Insurance?
You need commercial property insurance to protect your business from financial losses resulting from fire, natural disasters, theft, and other problems.
Typically, the median cost for commercial property insurance is $63 per month or $756 annually, which includes a $60,000 coverage limit and a $1,000 deductible.
However, Insureon, a renowned insurance provider, conducted a study that showed that around 42 percent of small business owners pay between $500 to $1000 annually for commercial property insurance, while 16 percent pay less than $500 yearly.
How Much Does Workers’ Compensation Insurance Cost?
Although not required by all states, purchasing workers’ comp insurance can be profitable for small businesses. It can protect employers from costly lawsuits and financially assist injured employees.
But how much does workers’ compensation insurance cost?
We’ve discovered that small businesses pay an average of $70 per month or $840 annually for workers’ compensation insurance.
Remember that this cost depends on factors such as the location, industry, and number of employees.
What is the Cost of Professional Liability Insurance?
The cost of professional liability insurance, also known as errors and omissions insurance, depends on the type of work and industry.
Small businesses pay about $61 per month, or $735 annually, according to Insureon.
However, over 33 percent of small business owners spend under $600 annually on their Professional Liability Insurance policy.
What is the Cost of Cyber Liability Insurance?
The median cost of cyber liability insurance is $123 or $1,485 annually.
This type of coverage protects your business from financial losses incurred by cyber-related incidents and data breaches.
If your business is responsible for client cyber security, you’ll pay more for this insurance since you’ll also need third-party coverage.
But typically, most small businesses need first-party coverage.
How Much Does Business Interruption Insurance Cost?
This insurance covers a business’s financial losses due to disrupted or interrupted operations.
This coverage helps businesses recover lost income, pay ongoing expenses, and mitigate the financial impact of events such as natural disasters, fires, or other unforeseen circumstances that result in the temporary closure or disruption of business activities.
Business interruption insurance generally ranges from $40 to $130 per month ($500 to $1,500 per year), but larger businesses with high liabilities may face higher costs.
What is the Cost of Inland Marine Insurance?
Inland marine insurance covers movable property during transportation or storage away from the insured’s premises. It covers risks like equipment, merchandise, and artwork damage, loss, or theft.
The median premium for inland marine insurance is $14 per month ($169 annually). The median cost offers a more accurate estimate than the average by excluding significantly high and low premiums.
What Factors Affect Your Small Business Insurance Costs?
There are several factors influencing insurance costs, including:
- Business type: Higher-risk businesses may attract higher premiums.
- Location: Areas with higher crime rates or severe weather conditions may incur higher insurance costs.
- Coverage types: More comprehensive coverage generally results in higher premiums.
- Deductible: A higher deductible can attract lower premiums, but you’ll pay more out of pocket if you file a claim.
- Business size: Larger businesses can face higher liability risks, resulting in higher insurance costs.
- Claim history: Filing insurance claims in the past can result in higher insurance costs due to being viewed as a higher risk.
- Safety and security measures: Effective measures to reduce risks can help lower insurance costs if recognized by the insurer.
Here is How You Can Lower Your Small Business Insurance Costs…
Are you tired of paying high premiums for your small business insurance?
Here’s how to lower your insurance costs:
- Obtain and compare quotes from multiple insurance providers to find the best deal for your business.
- Consider increasing your deductibles to lower insurance premiums, but only if you can afford to pay the higher deductible when filing a claim.
- Implement safety measures to qualify for lower insurance rates and reduce the risk of accidents or injuries.
- Identify and address risk factors specific to your industry that can lead to higher insurance premiums.
- Implement security measures and provide employee training to reduce risk factors and potentially lower insurance costs.
Wrapping It Up
Understanding the cost of small business insurance is crucial for protecting your business from potential financial risks.
Remember that costs can vary depending on factors such as coverage types, industry, location, and business size.
While average costs provide a general idea, we recommend obtaining quotes and comparing options from multiple insurance providers.
Implementing safety measures, addressing risk factors, and enhancing security can also help lower insurance premiums.
By being proactive and informed, you can find the right coverage at a reasonable cost to safeguard your small business effectively.
Which is the Best Type of Small Business Insurance?
The best type of small business insurance depends on the business’s specific needs. Common types include general liability, property, workers’ compensation, professional liability, business interruption, and cyber liability insurance.
We recommend speaking with a licensed insurance agent or broker to determine your business’s specific needs.
Can You Have Multiple Types of Insurance?
Yes, it’s common for businesses to have multiple types of insurance as they may require different coverage to protect against different risks.
How Does Business Insurance Work?
Business insurance transfers the risk of financial loss from the business to the insurance company in exchange for a premium. If a covered event occurs, the insurance company will provide financial compensation to the business up to the policy’s limits.
What Isn’t Covered by Business Insurance?
Certain events and circumstances are typically not covered by business insurance, such as intentional acts of the business owner, illegal activities, and damage caused by wear and tear.
Reviewing your policy carefully to understand the specific coverage limitations and exclusions is important.
Which Type of Insurance Covers the Goods Inside the Business?
Commercial Property Insurance typically covers the goods and equipment inside the business premises from various covered events.
It can help businesses replace or repair lost or damaged goods and equipment, but specific coverage limitations and exclusions should be reviewed carefully.