How Much Does Business Insurance Cost?



 
 
       
 
          

Type of Business Insurance Coverage	Average Monthly Premium
Business owners policy	$101
Commercial auto insurance	$188
General liability insurance	$65
Professional liability insurance	$97
Workers' compensation insurance	$111

These rates were taken from Progressive. An independent insurance agent can help you compare quotes for business insurance from several different carriers near you.

How Business Insurance Costs Are Calculated

Insurance companies calculate premium rates by considering a number of different factors. They start by reviewing a list of various risks, such as a business's size, location, and industry. 

Each of these risk factors has a cost associated with it that's determined through studies of historical trends or analytical models. Keep in mind that the cost of your coverage might change over time as the financial demands of offering the plan may increase. 

Factors That Affect the Cost of Business Insurance

The coverage needed for your business may vary, but the factors that affect the cost of your insurance policy overall tend to be similar. To determine the cost of your business's general liability insurance, business owners policy (BOP), commercial umbrella insurance, etc., insurance companies evaluate several factors. These range from your business's location to your claims history.

Industry

Depending on your business's industry, it carries either more or less risk to insurance companies. Manufacturing companies that use heavy equipment are riskier to insure and often pay more for business insurance. 

Similarly, bakeries use ovens and hot equipment that could easily lead to fires, so businesses in this industry can pay quite a bit above average for their business insurance as well. Depending on the operations of your business, you could pay much more or less for the same type of coverage as a business of the exact same size in a different industry. 

Location

The location of your business also impacts its insurance rates. If the area you're located in is prone to tornadoes or hurricanes that could potentially damage your business, you could pay more for your small business insurance. 

Also, depending on your state's requirements for workers' comp or commercial auto insurance, you might be required to carry more coverage than a business in another state and will, therefore, pay more for your overall policy.

Number of Employees

The size of your business and its team is another risk factor insurance companies consider when calculating the rate of your business insurance. In a construction business with four employees, the cost of workers' comp can be thousands of dollars annually. If that same business had eight or 10 employees, they could pay much more than that. 

But smaller businesses, like accounting firms with only a handful of employees, might pay only a few hundred dollars annually for workers' comp. If your business has zero employees, you might not have to pay for workers' comp at all.

Payroll and Sales

The payroll and sales of your business are another factor insurance companies use to calculate your premium costs. For starters, workers' comp costs are calculated by factoring in your business's annual payroll. 

Workers' comp average rates vary by state, but the National Academy of Social Insurance reports that they average $1 per $100 of monthly payroll. So, the larger your staff size and payroll, the more you'll pay for workers' comp. 

Similarly, the more your small business sells each year, the more general liability insurance it's likely to need, which can also drive up the costs of your coverage.

Prior Insurance Claims

Businesses that have already filed multiple business insurance claims can indicate a large risk for insurance companies, which can result in higher premium rates. Likewise, businesses with no prior claims signal a lower risk to insurance companies and can lead to coverage discounts or cheaper overall premium rates. 

If your small business has filed several workers comp or commercial auto claims in the past, an insurance company might determine that something about your work environment or training practices is too risky. You might even be denied coverage by certain insurers. 

Coverage Limits and Deductibles

The amount of coverage your business needs can obviously impact its policy premium rates. As a general rule, the more coverage your business needs, the more expensive its insurance is likely to be. 

For example, larger businesses with more commercial property or more employees need extensive coverage compared to smaller businesses with few or zero employees and very little property. 

Further, the higher your insurance deductible, the lower your premium might be. Just keep in mind that choosing a higher deductible may mean fewer expenses on a monthly basis for your insurance premiums, but your business will have to spend more each time it files a claim.

How Much Does Commercial General Liability Insurance Cost?

Most businesses need to be protected against third-party lawsuits with a commercial general liability insurance policy. This coverage averages $300 to $1,000 per year, depending on the size and type of your business, among other factors. The greater your business's risk of lawsuits, the more expensive its general liability coverage is likely to be.

Factors That Affect Commercial General Liability Insurance Costs

General liability insurance helps your business recover financially if a third party, like a customer or other visitor, claims you caused them bodily injury or personal property damage and files a lawsuit. 

General liability insurance can help reimburse your business for the legal costs, including attorney, court, and settlement fees. Without this coverage, your business could potentially go bankrupt after just one unexpected lawsuit. 

Some factors that influence general liability insurance small business costs are:

• Your business's location: Like all types of coverage, your location influences the cost of your liability coverage, too.
• Your business's operations: If your business's operations put it at a higher chance of lawsuits, your liability coverage will be more expensive. 
• The amount of coverage you choose: The more coverage you need, the more you'll pay.
• Your selected deductible: Higher deductibles result in lower overall premiums. 
• Your business's annual payroll: The number of employees you have and the overall annual payroll your business pays out also influence the cost of your liability coverage.

An independent insurance agent can help your business get equipped with the right type of liability coverage and further explain the factors that influence its cost.

Factors That Affect Workers' Compensation Insurance Costs 

The cost of your business's workers comp insurance depends on exactly how many employees you have as well as your overall payroll. Some factors that affect workers comp costs are:

• Job specifications: The type of work your employees perform creates more or less of a risk to them and your insurance company. The less risky the profession, the lower your potential coverage costs.
• Prior claims: The fewer workers comp claims you have on record, the better for both your insurance company and your coverage rates. Your business will be seen as safer the fewer claims it has on record. 
• Company payroll: Since workers comp rates are calculated per $100 of employee payroll, the higher this amount is, the more you'll pay for this coverage.

An independent insurance agent can help you find the right amount of workers comp coverage for your unique business.

Factors That Affect Professional Liability Insurance Costs

Professional liability insurance protects your business in a way that general liability insurance doesn't. Professional liability coverage is designed to protect against any harm you might cause the public based on your professional services, such as if you give advice that causes someone a loss. 

It also protects you in case of professional mistakes, such as telling a client the wrong information, which leads to loss or harm. Professional liability insurance costs vary by industry and other factors. A couple of factors that influence professional liability insurance costs are:

• Number of employees: Often, the larger the size of your business's staff, the more you'll pay for professional liability insurance.
• Risk level of the business: How risky your business's operations and services are directly correlates to the cost of your professional liability coverage. Businesses with more costly services or that provide services that handle assets or private or sensitive client data often pay much more for this coverage than others due to the increased risk factor.

Work with an independent insurance agent to get all the professional liability insurance your business needs.

Factors That Affect Commercial Auto Insurance Costs

Your personal auto insurance policy won't cover business vehicles and disasters that happen on the job in most cases. Your business needs commercial auto insurance to protect against claims that might arise after traffic accidents involving company vehicles, as well as to get reimbursement for damage to or theft of your company vehicles. 

Without a commercial auto policy, your business could have to pay for the cost of repair or replacement to company vehicles out of its own pocket. It would also be vulnerable to lawsuit costs for related incidents. 

Some factors that affect the cost of commercial auto insurance for small businesses include:

• Vehicle usage: The amount of time and the distance your employees have to drive in company vehicles increase their risk factor.
• Vehicle specifics: The make and model of your company vehicles impact your coverage rates, similar to how they do with personal auto insurance.
• Driver histories: If your company's drivers have no prior traffic violations, they'll be seen as less risky to insure than those with more colorful driving records.
• Company services: How your company uses its vehicles can also impact its coverage rates, such as if your company vehicles are used to make deliveries, etc. 

A local independent insurance agent can help you get the proper amount of commercial vehicle coverage for all your company cars, trucks, vans, etc.

Factors That Affect Commercial Property Insurance Costs

The cost of coverage for your business's building and contents also varies depending on several factors, including the value of your business's property and the age of construction, as well as location. 

It's estimated that small businesses pay an average of $800 annually for their commercial property insurance alone. An independent insurance agent may be able to help you decrease these costs.

How to Reduce Your Business Insurance Costs

Fortunately, there are many ways to save money on business insurance. Start by checking for these common business insurance discounts available from many major insurance companies:

• Safety training discount: You can save money on business insurance if you enforce mandatory safety training for your employees.
• Paid-in-full discount: You can save money on business insurance by paying your entire year's premium upfront in one lump sum.
• Bundling discount: You can save money on business insurance by bundling several types of coverage together through the same carrier.
• Claims-free discount: You can save money on business insurance by remaining claims-free for a period of several years. 

An independent insurance agent is a great ally when it comes to finding you the most discounts you qualify for on business insurance.

An Independent Insurance Agent Can Help You Compare Business Insurance Rates

Since independent insurance agents have access to multiple insurance companies, they're free to shop and compare business insurance policies for you. They'll present you with quotes for only the policies that provide the best overall blend of coverage and cost. And down the road, your agent can help you file business insurance claims or update your coverage as necessary.