Small business insurance is a crucial investment for protecting your company from various risks. The average small business insurance cost is approximately $249 per month, totaling $2,988 annually. This figure encompasses a business owner’s policy (BOP), commercial auto insurance, and workers’ compensation insurance. However, your specific insurance expenses can vary considerably based on several factors. These include the nature of your business, its location, the number of employees, and the specific types of coverage you select.
Key Takeaways
- A business owner’s policy (BOP) typically costs around $684 per year, covering events like property theft, weather-related damages, lawsuits, and lost income.
- Workers’ compensation insurance averages $540 annually and is mandatory in most states, even for businesses with just one employee.
- Savings on small business insurance are achievable through comparing quotes, bundling policies, opting for higher deductibles, and securing discounts for annual premium payments.
Understanding the Average Cost of Small Business Insurance
A robust small business insurance strategy includes multiple coverage types tailored to the unique risks your business faces. For instance, businesses handling sensitive client data require cyber liability insurance.
The following table provides an overview of the average costs associated with different types of small business insurance:
| Type of policy | Average Monthly Cost | Average Annual Cost |
|---|---|---|
| Business Owners Policy | $57 | $684 |
| General Liability Insurance | $42 | $504 |
| Commercial Property Insurance | $67 | $804 |
| Commercial Auto Insurance | $147 | $1,762 |
| Commercial Umbrella Insurance | $75 | $900 |
| Contractor’s Tools and Equipment Insurance | $14 | $168 |
| Cyber Liability Insurance | $145 | $1,740 |
| Errors & Omissions Insurance | $61 | $735 |
| Inland Marine Insurance | $29 | $350 |
| Product Liability Insurance | $42 | $504 |
| Workers Compensation | $45 | $542 |
Source: Insureon
Factors Influencing the Cost of Your Small Business Insurance
Insurance companies consider various elements when determining the cost of your small business insurance. Understanding these factors can help you anticipate and potentially manage your insurance expenses.
| Factor | Description |
|---|---|
| Industry Type | Industries with higher inherent risks, like construction, typically face higher insurance costs due to the increased potential for accidents and liabilities. |
| Location | |
| Your Building | The age, size, and safety features of your building, such as burglar alarms and fire suppression systems, influence commercial property insurance costs. Newer buildings with advanced safety measures often qualify for lower premiums. |
| Payroll & Annual Revenue | |
| Number of Employees | A larger workforce increases the risk of workplace injuries, accidents, and cyber threats, impacting insurance costs, especially for workers’ compensation and cyber liability coverage. |
| Time in Business | |
| Claims History | A history of frequent or significant claims can substantially increase your insurance rates, as it signals a higher risk profile to insurers. |
Detailed Cost Analysis by Coverage Type
Business Owners Policy (BOP) Cost
According to Insureon, the average monthly cost of a Business Owners Policy (BOP) is $57. A BOP is a bundled policy that combines general liability, commercial property, and business interruption insurance, often proving more cost-effective than purchasing each policy separately.
Your specific BOP cost will depend on factors such as the age and size of your building, your industry, the number of employees, equipment costs, and your business location.
General Liability Insurance Cost
Insureon reports that the average cost of general liability insurance is $42 per month. This coverage protects your business from claims and lawsuits related to property damage or injuries caused to others, covering legal fees, settlements, and other associated costs. It also extends to claims of reputational harm and advertising injuries.
Factors influencing your general liability insurance costs include your industry type, location, payroll, annual revenue, building size, and claims history, as well as your coverage limits.
Business Interruption Insurance Cost
If your business operations are disrupted due to a covered event like a fire, business interruption insurance, also known as business income insurance, covers lost income and other expenses, such as mortgage or lease payments, temporary relocation costs, taxes, and payroll.
Premiums for business interruption insurance are affected by factors like your revenue, industry, location, and the value of your business property.
Commercial Property Insurance Cost
The average monthly cost of commercial property insurance is $67, according to Insureon. This insurance covers damages to your building, stolen business property, vandalism, fires, and severe weather.
Factors determining your commercial property insurance costs include your location (high-risk areas cost more), the size and age of your building, equipment costs, covered perils, and fire protection measures.
Commercial Auto Insurance Cost
According to Insureon, the average monthly cost of commercial auto insurance is $147. This covers your business and its employees for accidental injuries and property damage caused to others while driving for work. Additional coverage options like collision and comprehensive insurance can cover car repair bills resulting from accidents, fires, theft, and severe weather.
Your commercial car insurance costs are influenced by driving records, the number and types of vehicles, claims history, location, and industry type.
Commercial Umbrella Insurance Cost
Commercial umbrella insurance averages $75 per year, according to Insureon. This coverage provides additional liability protection when your other policies’ limits are exhausted.
The cost of commercial umbrella insurance depends on factors like your industry and the amount of additional coverage purchased.
Contractor’s Tools and Equipment Insurance Cost
The average monthly cost of contractor’s tools and equipment insurance is $14, according to Insureon. This coverage helps repair or replace stolen, lost, or damaged tools and equipment.
Your tools and equipment insurance costs are influenced by your industry, the value of your tools and equipment, and how frequently you transport them.
Cyber Liability Insurance Cost
Cyber liability insurance averages $145 per month, according to Insureon. It covers costs associated with cyberattacks, including forensic investigations, customer notification, data recovery, ransom payments, lost income, and legal costs.
Factors influencing cyber liability insurance costs include your industry, network security, the number of individuals with access to your data, company revenue, and claims history.
cyber liability insurance cost factors
Errors & Omissions (E&O) Insurance Cost
Errors and omissions (E&O) insurance averages $61 per month, according to Insureon. It covers your business against claims of professional mistakes, even if the claim is without merit.
Your E&O insurance costs are affected by your industry, the size of your business, daily business operations, and claims history.
Inland Marine Insurance Cost
The average monthly cost for inland marine insurance is $29, according to Insureon. This covers business property while in transit, including products and goods being shipped, as well as equipment used for business purposes.
The primary factor determining your inland marine insurance costs is the value of the equipment and products you transport.
Product Liability Insurance Cost
Product liability insurance averages $42 per month, according to Insureon. This covers claims that products you manufactured, distributed, or sold caused property damage or injury to others. This coverage is often included within general liability insurance.
The main cost factor for product liability insurance is the number of lawsuits related to your services or products.
Workers’ Compensation Insurance Cost
Workers’ compensation insurance averages $45 per month, according to Insureon. It covers expenses related to employees’ work-related injuries or illnesses, including lost income, rehabilitation services, disability benefits, and death benefits.
Workers’ compensation insurance is required in most states, even if you have just one employee. Your workers’ comp costs depend on factors such as your industry, number of employees, job duties, location, and claims history.
Strategies to Save on Small Business Insurance
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Compare Quotes: Obtain quotes from multiple insurers to find the most competitive rates.
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Bundle Policies: Opt for a business owners policy (BOP) to bundle essential coverage types, which is often more economical than purchasing them separately.
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Pay Annually: Some insurers offer discounts for paying your premium in full annually rather than monthly.
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Raise Your Deductible: Increasing your deductible can lower your premiums, but ensure you can afford the higher out-of-pocket expense in the event of a claim.
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Lower Your Risks: Implement proactive measures to reduce risks, such as installing fire and burglar alarms or developing a workplace safety program.
By understanding the factors that influence small business insurance costs and implementing strategies to reduce your premiums, you can protect your business without breaking the bank.
