A business requires a lot of attention, especially if it is small, because there are scenarios that could kill it before it can thrive. But understanding that they are a fundamental pillar of the American economy, every entrepreneur should know how much insurance is for a small business to protect.
When starting a business, it is important to ensure that everything runs smoothly, receives as much income as possible, and provides the business’s longevity. However, the company may face risks that it cannot ignore. Insurance protects you from potential liability on some claims.
At first, you may think that the cost of small business insurance is expensive or an unnecessary expense. Especially if you are starting in business, it is normal for these types of doubts to arise. But nothing could be further from the truth since not having it could be extremely dangerous.
What Influences the Cost of Small Business Insurance
To get an idea of how much small business insurance costs, you need to know what it is and how it works. Small business insurance involves incorporating certain types of insurance key to protecting the business.
The cost of the policies varies from the cheapest to the most expensive, depending on different factors that make up the insurance, as well as details about the company, profession, and some particular risks. Considering these characteristics, you can estimate the amount to be paid and start looking for a good package.
In that sense, a company’s premiums can change considerably depending on these factors:
- The Company
- Nature of the business
- Years in business
- Whether is located out of an office
- Whether it involves travel or transportation of its own or others’ property
- Whether it is a sole proprietorship, LLC, or other classification
- Number of persons employed
- Total amount of employee’s salary
- Customer base
- Insurance coverage included in the package
- Coverage limits
- Claim history
- Insurance provider
- Business assets, including office equipment, vehicle, and other supplies
- Risks faced by the company
It is important to clarify that not all insurance policies or packages should have all the abovementioned aspects. But it is necessary to evaluate the company’s status to obtain insurance that protects the most at-risk parts of the business.
How to find out the cost of insurance for small businesses
There are different ways to break down the cost of insurance for a small business. It takes into account the types of policies, packages, and coverage. It is up to the owner to decide how they want to protect their business, but before doing so, they should look at the options the insurance market offers.
Insurance costs per policy
Each business has its specific risks that require additional coverage. In that sense, there are common costs that cover most scenarios that small business owners might face.
1. General liability insurance
This insurance protects the business if the owner or employees cause damage to third parties, bodily injury, or related circumstances. It covers costs related to claims and lawsuits, including investigations, legal fees, settlements, and damages.
Typically the cost of liability insurance is $46 per month, but it can be less, or even more, about $166. It considers the type of business, number of customers, years of operation, income, and claims history.
2. Commercial property insurance
This insurance protects your small business property, assets, and equipment against damage, breakdown, and theft. It will also replace lost income. It costs approximately $85 per month, although rates range from $42 to $147, depending on location and assets owned.
3. Business Owner’s Policy (BOP)
Its package policy combines key insurance coverages that most small businesses need. It usually combines general liability insurance and business property insurance. The cost will depend on the assets, location, and risks to which you are exposed to. It ranges from $42 to $292, but the most commonly paid figure is $100.
4. Professional liability insurance
Professional liability takes care of the business if a client claims that a service has generated damages leading to losses and decides to take legal action. To protect your business from this, you can pay $60 per month or any rate from $40 to $84 monthly. This insurance considers employees, location, industry, coverage, and limits.
5. Errors and Omissions Insurance
One of the risks of a business is making mistakes that result in damage. With errors and omissions insurance, you cover the industry from claims for negligence, errors, and carelessness while performing a task. It costs $145 per month, depending on location, profession, clients, and number of employees. Premiums range from $75 to $167 per month.
6. Workers’ Compensation Insurance
This insurance covers workers’ medical expenses and lost wages due to an on-the-job injury or illness. It protects employees from self-paying medical costs and prevents owners from being sued.
The insurance cost considers the employees’ location, industry, and salary. It should note that it is paid per employee and has a value of $38 per month; however, rates vary from $5 to $240 per month.
7. Cyber Liability Insurance
With this insurance, you protect the company from liabilities, damages, and losses related to data breaches or any cyber attack. The typical cost is $92; premiums range from $63 to $667 and are calculated according to risks, income, industry, and location.
Cost of insurance by profession
It is enough to have an idea and execute a plan of action to have a business; taking care of it must be one of the priorities; that is why you must include in the expenses the cost of insurance. These also vary according to the profession.
1. Restaurant Insurance
These policies cover claims related to foodborne illnesses, third-party property damage, customer damage, intellectual property damage, and business interruption. It usually costs $300 per month.
2. Retail Insurance
With retail insurance, you protect the business from liability concerning damage to customers and third parties, as well as damage to the company itself. It costs $49 per month.
3. Plumbing Insurance
Plumbing insurance covers claims and other liabilities for injuries and damages to customers, a third party, or property while performing any service. These policies have a monthly cost of $89.
4. IT Consultant Insurance
This insurance is ideal if you want to protect your small business against third-party injuries and property damage. It also includes any mistakes you make that could cause damage to a client and generate debts. It costs $89 per month.
It is important to remember that there are risks that can damage the stability of your business; there are aspects that you can control and others that you cannot. Therefore, most insurance companies offer policies to take care of and protect against the most common ones.