Although it can be exciting and fulfilling, starting your own business can also expose you to a variety of risks. Here comes the role of business insurance. While no insurance can completely eliminate risk, business insurance can help you be ready for unforeseen events like lawsuits, worker injuries, and automobile accidents.
What is the price of business insurance?
Depending on the size of your company, the number of employees, and the insurance needs you have, small business insurance may cost you a total of $600 to $1,200 per month or more. The average cost of small business insurance can help you find the best policies at the best rates for the unique needs of your company. Your business probably needs a few different types of business insurance. Here are some of the most typical business insurance coverages you might require, along with an estimate of their typical costs.
$65 to $88 per month for general liability insurance
Claims involving bodily injury, property damage, and reputational harm are covered by general liability insurance (including claims of slander, libel, or copyright infringement against your business). Consider it the equivalent of homeowner\’s insurance for businesses. Although it isn\’t typically required by law, general liability insurance is frequently needed to be granted certain licenses and contracts.
The average monthly premium for general liability insurance is between $65 and $88.
$56 to 117 per month for professional liability insurance
Professional liability insurance, also known as errors and omissions (E&O) insurance, guards you against work performance claims, such as errors, omissions, and negligence, if your company offers professional services or advice. For instance, a realtor may be held responsible for damages if mold in a basement goes unreported. The average monthly premium for professional liability insurance is between $56 and $117. Some states require real estate agents to carry E&O insurance while others do not, so check with an insurance broker in your area to see what you need. Different states have different requirements regarding which industries and professions need professional liability insurance.
Insurance for workers\’ compensation: $70-$111 per employee per month
When one of your employees is hurt at work, workers\’ compensation insurance covers benefits and lost wages. When hiring their first employee, small business owners in the majority of states (including California, Illinois, and New York) are required to obtain workers\’ compensation insurance coverage.
The majority of workers\’ compensation insurance premiums are based on payroll, so as you add more employees, your premium goes up. The average monthly premium for workers\’ compensation insurance is between $70 and $111 per employee.
Commercial auto insurance: $135–$188/month
Your company\’s vehicles are insured against accidents under commercial auto insurance. If your company owns any cars, such as a food truck, a construction vehicle, or a delivery van, it is necessary in all states (with the exception of New Hampshire and Virginia).
The average monthly premium for commercial auto insurance is between $135 and $188.
Owner\’s policy for a business: $99 to $261 per month
A business owner\’s policy combines general liability and commercial property insurance protection into one package. The specifics, however, change based on your requirements and the options provided by your provider. A business owner\’s policy provides coverage for accidents, crises, theft, and vandalism on your property in addition to the safeguards provided by a general liability insurance policy.
The average cost of a business owner\’s policy is between $99 and $261.
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What factors affect the cost of business insurance?
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Size of the company and the number of employees
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History of claims Location Industry
The prices for business insurance mentioned above are averages. Premiums in excess of or below that range are possible. The cost of your business insurance depends on a number of variables. The following are a few of the most crucial factors:
Size of the company and the number of employees
When scaling your business, you should anticipate paying more for business insurance coverages as it expands. Your insurance costs will increase for each sale you make, each employee you bring on board, and each asset you buy (including vehicles and real estate).
History of claims
If an insurance provider notices that your company has a history of frequent claims, they might classify you as a high-risk customer and increase your monthly premium. Implement and abide by safety procedures to reduce the likelihood of accidents if you don\’t want your company to find itself in this situation.
Location
The cost of your business insurance coverages is also influenced by the location of your company. You might be required by some states to buy insurance coverage that is optional elsewhere. For instance, Oregon law firms are required to carry professional liability insurance. Additionally, higher business insurance rates could be observed in high-risk regions (such as cities for commercial auto insurance) or regions where general business expenses are higher.
Industry
Risks to businesses vary depending on their type. A florist might require commercial auto insurance to cover accidents involving their delivery truck, whereas an ophthalmologist\’s private practice may require professional liability insurance to defend against negligence claims. Businesses engaged in riskier activities, such as electrical contracting, logging, and fishing, will probably pay more for workers\’ compensation insurance.
Things to take into account when selecting business insurance
It\’s time to start looking for insurance once you have a handle on the various types and their typical costs. Before committing to a plan, consider taking the following actions:
Know what you need. Depending on the region in which a business operates, different industries and businesses face varying degrees and types of risks that are common to the sector as a whole. Determine the specific risks facing your small business and the type of coverage that will best shield it; an insurance broker can offer guidance in this regard. Make sure you are also aware of any regional or local laws requiring business insurance.
Get several estimates. To choose the best price and coverage for your company, request quotes from a range of providers. Don\’t just accept the first offer you receive, as you would with any significant purchase.
Cover up. A business owner\’s policy, for example, combines general liability insurance with commercial property insurance. These types of plans are offered by some providers. This may be a very effective way to lower your monthly premium.
Costs of business insurance FAQ
What should my insurance budget be for my business?
The cost of small business insurance varies according to the requirements and risk exposure of your company. Start with general liability insurance at a cost of $65 per month, and then think about any additional insurance you might require.
What kind of insurance is recommended for business startups?
If you have employees, start with general liability insurance, workers\’ compensation insurance, and commercial auto insurance (if you have vehicles). Then, based on your risk exposure, think about what else your company might require.
Is business insurance an initial investment?
Yes, buying business insurance is a crucial component of running a regular business. The good news is that, especially if you don\’t have employees, your business insurance costs will probably be lowest when you first start.