When we start a small business, we must keep in mind the insurance cost, which can vary depending on the coverages we buy. For this reason, it is normal to ask how much insurance for small business costs and thus get to know the general monthly insurance costs we will have to pay.
We can buy general liability, commercial property, business interruption, and cyber liability, among others. The more coverages we buy, the more we will pay, but our business will also be more protected against any eventuality.
Costs that small business insurance can have
The most common coverages for small businesses are as follows:
- General Liability: average costs $30 per month or $360 per year.
- Commercial property: average cost is $63 per month, averaging $756 per year.
- Inland Marine: an average of $14 per month, and $169 per year, although this coverage will not apply to all businesses, and the price is highly variable.
- Cyber Liability: usually has an average cost of $123 per month and an annual average of $1,485, the most expensive coverage in our insurance policies.
- Business Interruption: typically pays around $40 per month, an average of $480 per year.
- Workers’ compensation: the average cost of these policies will be around $70 per month and an average of $840 per year.
If we contract these coverages for our business, the cost will be approximately $340 per month, with an annual policy cost of around $4,090.
To better understand each of the coverages, we will make a detailed analysis of them.
General Liability Coverage
This insurance will protect us from lawsuits or claims whenever a person is injured on our property or if we are responsible for damage to another person’s property. Prices for this insurance can vary, averaging between $30 and $50 per month, and rarely will we pay more than $100.
Among the factors that affect this type of insurance will be:
- Size of the building: the larger the facility where we operate our business, the higher the insurance we will have to pay.
- Location: if our business is located in an area with a high crime rate, we will likely be charged more money.
- Size of payroll and annual income: the higher our expenses or operating costs, the more we will have to pay for insurance.
- Claims history: if we have filed claims in the past with our insurance company, we could end up paying more money in our premiums.
- Policy details: if the coverage limits are higher, it could affect the cost of commercial insurance.
Commercial Property Insurance
Standard coverage of this type will have a limit of $60,000, with a $1,000 deductible. The rates are variable depending on the insurance company, and the different factors that may affect our policy, among which are:
- Location: premiums could increase if we are in an area prone to natural disasters.
- Age of the building: large and older buildings will have to pay extra for coverage.
- Fire protection: we can reduce our insurance premium costs with different fire protection systems.
- Equipment costs: these insurances respond in case of lost or damaged items on our property, so if we house expensive equipment, we will have to pay more.
- Types of risks: depending on the perils we have to cover our business, we will have to pay more for our coverage or less.
Business interruption insurance
If the business must be temporarily closed, we will be covered by this policy, including loss of income, mortgage payments, leases or rents, taxes, and payroll, among others. The factors that will affect this type of insurance will be the following:
- Income level: this insurance covers the company’s income, so it is completely normal that the higher the income, the higher the premium will also be.
- Industry: depending on our industry, we will have to pay a higher premium.
- Value of the business property: the higher the value, the more we will have to pay for the business premium.
Inland marine insurance
This insurance protects if something happens to our property or products during transit. Typically the coverage offered in these insurances usually has limits of around $5,000 for cleaning, construction, or installation industries.
However, photographers or videographers usually take out a policy with a coverage limit of up to $86,000, so premiums vary quite a bit. The main factor influencing which coverage to purchase will be the cost of the equipment or product.
How much does cyber liability insurance cost?
This insurance will protect the company from financial losses in a cyber attack. These insurances can even cover legal fees and settlements, payment processing, financial services, investment, and insurance companies pay more for this type of insurance.
Factors that will affect these insurance policies will be as follows:
- Industry: some companies are more exposed to cyber attacks, so they will pay more premiums.
- Revenues and costs: the higher our revenues and operating expenses and costs, the more we will have to pay.
- Network security: we must have solid security practices to have ideal coverage.
- The number of people who have access to the data: the more access rights we have, the more we will have to pay in premiums.
- Claims history: if we have made cyber insurance claims in the past, the premiums could be higher.
Workers’ compensation insurance costs
Workers’ compensation insurance will help employees who are injured while working. It will help pay for medical expenses as well as work losses, and in most states, it is mandatory to have this type of coverage.
Among the factors that affect these policies will be:
- Payroll size: the larger our company is and our payroll size, the more we will have to pay for workers’ compensation insurance.
- Job duties of employees: if we have employees with risky tasks, the insurance policies will be higher.
- Location: In some states, such as Ohio, Wyoming, or Washington, it is mandatory to purchase state-funded workers’ compensation. In the other states, we may seek quotes from insurance companies.
In some states like Alabama, if we have less than five employees, or in Arkansas, if we have less than three employees, this insurance will not be mandatory. It will also not be mandatory for companies in Texas or Wyoming.
How can insurance costs be reduced for small businesses?
Insurance protects our business against costly damages, which can be a significant expense for small businesses. It is best to have a BOP type policy, which will bundle the three types of coverages essential to operate, being cheaper than buying the policies separately.
We can also follow some tips to reduce the costs of our commercial insurance, such as:
- Search and compare quotes from different insurance companies.
- Bundle different policies with the same insurer.
- Pay premiums annually instead of monthly to obtain discounts for early payment.
- Increase our deductible if we can afford to pay out-of-pocket expenses.
- Avoid risks that may result in a claim.
By following these simple recommendations, we can save money on our insurance policies and consequently save money on our business.