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How Much Does Business Insurance Cost?
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Determining how much business insurance costs depends on several factors, including the type of insurance, the industry in which you operate, the number of employees you have and where your business operates. Read on to learn more about small business insurance costs and find suggestions on ways to save on insurance, too.
Cost by type of insurance
Business insurance premiums vary widely by the location of your company, your business needs and other key factors, like employees. The table below may help give you a general idea (not exact figures) of your potential business insurance costs.
|Type of business insurance||Purpose||Average cost|
|Business owner’s policy (BOP)||Bundles multiple types of business insurance coverage into a single policy.||$84 per month|
|General liability insurance||Provides coverage to protect your company in the event of property damage, personal injury claims and certain types of lawsuits (i.e., libel and false advertising).||$53 per month|
|Business property insurance (also known as business hazard insurance)||Covers business property (for owners or renters) plus equipment, tools, inventory and more.||$63 per month|
|Professional liability insurance||Protects you if someone sues you for negligent acts, malpractice, errors and omissions.||$46 per month|
|Workers’ compensation||Provides benefits to employees in the event of illness or injury that occurs on the job.||$86 per month|
|Small business health insurance||Provide employees with health insurance coverage by covering all or some of the premium costs.||$623 per month, single coverage|
Sources: Insureon, Progressive Insurance and Kaiser Family Foundation.
The details above provide a summary of several core types of business insurance. Yet it’s important to understand that there are other types of coverage policies not included in the list above. Read more about the different types of business insurance here.
Small business health insurance costs are another expense that your business may incur if you have 50 or more employees. This type of insurance does not protect your business. Rather, it’s something your company may need to provide to its employees based on its size.
The law doesn’t specifically require you to provide health insurance coverage to your staff. However, under the Affordable Care Act, companies with at least 50 employees could face penalties if they fail to provide this benefit. In 2021, the penalty amount (or employer shared responsibility payment) is a whopping $4,060 per employee.
Small businesses who do cover health care coverage costs may qualify for a tax credit. The Small Business Health Care Tax Credit could add up to as much as 50% of the premiums it pays for employees.
Factors that affect how much business insurance costs
The location of your business can have a big influence on your insurance costs. In 2021, Oregon-based businesses pay $1.02 per $100 of payroll for workers’ compensation insurance. However companies in California pay $1.41 per $100 of payroll.
Your type of business, or more specifically the industry in which you operate, can also impact your business insurance costs. Businesses that represent a higher risk level to insurers can expect to pay higher premiums. Additionally, certain types of coverage might be more important depending on the goods or services your company provides.
Below are a few examples that demonstrate how your business type could impact your cost of business insurance coverage.
- Restaurant owners might face higher liability insurance premiums due to workplace settings.
- Construction and landscaping companies might have to pay higher premiums for property liability coverage to protect the expensive equipment they use on a day-to-day basis.
- Attorneys or financial advisors may pay more for professional liability coverage to protect them in the event that a customer files a negligence claim.
Number of employees
The number of employees that work for your company can have a significant impact on your business insurance costs. The rule of thumb is this: The more employees your business has, the higher the insurance premium. So, small businesses with just a single employee should face much lower costs than companies with a larger workforce.
Every employee a company has increases its potential exposure to injuries, accidents and other potential causes for insurance claims. And from a workers’ compensation standpoint, more employees leads to more premiums required by your state.
How to get cheap business insurance
Whether your business is small, medium or large, finding ways to lower costs may improve your bottom line. If you’re able to find more affordable insurance coverage, it can free up more money that your company can put to good use elsewhere.
Here are four tips that might help you cut your business insurance costs.
- Shop around and compare rates. By comparing offers from multiple insurance providers, you can make sure that your company is getting the best deal available on coverage.
- Bundle insurance policies. If you purchase multiple types of coverage from a single insurance provider (sometimes called a business owner’s policy), the provider might offer you a bundle discount in exchange.
- Opt for a higher deductible. If you’re willing to pay a higher deductible when you make an insurance claim, it could save your business money on its monthly premiums. However, you’ll want to be sure to pad your business’s emergency fund so you’re financially prepared in the event something goes wrong.
- Pay upfront. Paying your entire insurance premium in one annual lump sum up may help you save money versus breaking the cost down into monthly installments.
Business insurance costs: the bottom line
There is no one-size-fits-all approach to small business insurance. The options that work best for one company might not be the right fit for the next. So, it’s important to do your research to find the best coverage options for your business needs. And remember, cheapest isn’t always best. Saving money is great, but merely focusing on the lowest premium available could have negative consequences later.