Monthly business insurance premiums can be both affordable and expensive. How much business insurance costs will depend on the type of business you own. In fact, there are many factors that go into pricing a business insurance policy. You will get a better idea for how much you’ll have to pay for business insurance when you start comparison shopping and speaking with an insurance broker.
A financial advisor can help you create a financial plan for your business’s needs and goals.
Progressive Insurance says that the median monthly cost of a business insurance policy for new customers in 2021 ranged from $42 for professional liability to $68 for a business owners policy (BOP). Comparatively, Hartford says that the cost of general liability insurance for small businesses varies, but on average, it’s roughly $1,057 annually or about $88 a month.
Keeping this in mind, your cost will be more expensive or cheaper depending on your business’s insurance needs. Additionally, you should also note that your state may require certain types of insurance by law. But, even if it doesn’t, a lawsuit could put your business in jeopardy, if you aren’t insured.
Factors Affecting Business Insurance Premium Prices
Here are four common factors that could drive up your premium:
- Type of business. As you would expect, the type of industry your business is in will dictate the price of your premiums. A graphic design firm, for instance, where employees sit at a desk, will probably have lower premiums than a roofing company that has to insure employees against the risk of falling off a roof. On the other hand, if the graphic design firm has 200 employees, and the roofing firm only has eight, the graphic design firm could potentially spend more on premiums because of the size of the business.
- Location. If you are located in an area that is at a higher risk of flooding, earthquakes and other weather extremes, it will likely cost you more to get coverage than other areas with lower risks.
- Type of real estate. If your business operates in a rented commercial space or more of an industrial one where workers are exposed to greater risks, your premium will vary. For example, an office space can be cheaper to insure than a restaurant or a mechanic shop. Additionally, if you own the space, you will likely pay higher property insurance premiums than renting.
- Claims history. Prior claims can affect your premiums. For instance, previous lawsuits against your business or employee accidents can indicate a trend that will drive up your premium.
Types of Business Insurance
The type of business insurance that you need will determine the cost. Here are five common types of business insurance policies that you may have to consider:
- General liability insurance. Check your fine print, but usually this covers problems like your product or service going haywire and hurting somebody or damaging your business.
- Business owner’s policy. These generally will protect you from being sued and can also protect you if your business has to shut down due to a covered loss, which is also known as business interruption insurance.
- Workers’ compensation insurance. If you have a worker who gets injured on the job, this will pay for medical expenses and lost wages. Odds are, your state will require you to have this type of insurance if you have an employee.
- Commercial auto insurance. Do you have a fleet of delivery vans? If you have a business where employees must drive company vehicles to make pickups or deliveries, then you will likely need to get commercial auto insurance.
- Professional liability insurance. This is a special type of insurance that will protect you from a lawsuit if you make a mistake on the job. If you run an accounting firm, for instance, and you make a mistake that costs a client a fortune, and they sue you in court, this type of insurance can protect you.
Bottom Line
How much your business insurance costs will depend on the type of policy that you need, as well as other factors.
Those other factors include the location where your business operates, the risks employees are exposed to and the history of claims against your business.
Tips for Business Owners
- A financial advisor can help you create a financial plan to keep your investments and budget on track. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- If you need help writing a business plan, here are 10 components you should consider including.
Photo credit: ©iStock.com/nensuria, ©iStock.com/Luke Chan, ©iStock.com/Renata Angerami