How much does business insurance cost?
In 2022, the national median monthly cost of a business insurance policy for new Progressive customers ranged from $42 for professional liability to $70 for workers’ compensation or a business owners policy (BOP).
Business Insurance Policy
Business Owners Policy (BOP)
Notice how the average business insurance cost depends on the type of policy you need. Each policy protects against specific types of risk, and these differences are considered in the price.
So, can you expect to pay the median or average rate? It depends.
Insurers calculate how much your business insurance costs using several basic factors, including your profession, number of employees, and coverage needs. You can expect to pay above the average rate if you require more coverage, lease a unique property, or have a claims history. Learning how these factors influence your premium can help you secure the best combination of price and protection for your situation. Call us now, or begin a quote online.
Average cost of small business insurance
Factors that affect your business insurance costs
Many factors play a role in calculating your small business insurance cost. The most influential are usually your profession, number of employees, and coverage needs. These features can vary significantly from business to business.
Your profession can affect your average rate. A business type with higher risks can expect to pay more than a business with lower risk.
Tree trimmers and contractors are examples of riskier businesses. Their work is physical and often includes using power tools on other peoples’ properties. These factors increase exposure, which might result in a higher premium.
In contrast, a home-based financial advisor doesn’t share these risks, so they won’t be factored into their rate. Will they pay less? Probably, but not for certain. Professional services are exposed to different types of risk that can affect their small business insurance cost.
Number of employees
If a business has employees, it typically needs workers' compensation coverage. This is required by law in almost every state and adds to the cost of insuring your business.
Businesses with several employees can expect to pay more for insurance because their potential for claims is higher than a business with fewer, or no, employees. Each additional employee increases exposure to accidents and other mishaps that may result in a claim. Learn more about workers’ comp insurance cost.
The amount of coverage you select has an impact on your premium. For example, a $1 million/$2 million policy will generally cost more than a $1 million/$1 million policy.
These coverage levels usually can be adjusted to meet your specific needs, and they affect your final rate.
What is an aggregate limit?
An aggregate limit is the most an insurance company will pay toward a claim during a policy term. If your policy limits are $1 million/$1 million aggregate, you’re covered up to $1 million for a single incident but no more than $1 million for the policy term. The length of your policy term depends on your carrier, but annual terms are the most common.
For example, three clients sue a carpenter in a year for damages caused by faulty workmanship. Each client sues for $500,000, totaling $1.5 million. Individually, each incident is under $1 million, which meets the policy limits. However, the annual aggregate amount is exceeded, meaning the third incident will not be covered.
Small businesses that rent or own commercial property can get coverage with a business owners policy (BOP). In this case, your insurance company will factor in the property value when determining your premium. Learn more about BOP insurance cost.
If equipment is necessary to your operations, insurers will typically ask about it in your business insurance quote. These items can include tools, lawnmowers, ladders, and more. Expensive equipment can increase your small business insurance rate.
Where you live can affect your business insurance cost. Some areas, like large cities, have a high cost of living, which can translate to a higher rate. Property value, materials, repairs, and environmental risks are location-related factors your insurance company will consider.
Time in business
Your business tenure can impact how much you pay for insurance. For example, a startup might have a higher premium than a company that’s been in business for years. This difference is because newer ventures don’t have an established insurance history.
Insurers typically see businesses with a claims history as higher risk, which means they could pay more for insurance.
Getting the cheapest business insurance
Small business owners typically want the cheapest business insurance policy, but they need to weigh price against coverage. While you don’t want to pay for unnecessary coverages, you also don’t want to be underinsured if something happens.
Some strategies to save on your premium include:
- Selecting the right coverages: To maximize your savings, analyze your business to understand your specific needs. Be sure rule out inapplicable coverages. For example, an LLC that offers accounting services usually needs professional liability insurance. A cleaning service might not require this protection.
- Adjusting your deductible: You can save money by adjusting your deductible. A deductible is the amount you pay out of pocket toward a covered loss. Generally, the higher your deductible, the lower the cost of your annual premium. Make sure you’re comfortable paying the deductible you select.
- Managing risks: A risk management plan can help prevent accidents and lower your rate. For example, maintaining equipment, clearing walkways, and establishing safety procedures can decrease your business insurance cost.
- Finding discounts: Discounts are an easy way to get affordable business insurance. Your carrier, business class, and location will determine the discounts you’ll have access to. Some insurance companies offer discounts for paying in full or having an existing policy with them. Ask about discounts when getting your quote.
Get your personalized business insurance rate today
The best way to find out how much you’ll pay for business insurance is to get a quote. Take the guesswork out of finding the right cost and coverage by speaking with a licensed professional. They can walk you through the process and customize your small business insurance policy. Call us today, or start a quote online.