Business Insurance Cost: What You Need to Know

Entrepreneurship always involves risk, which is why business insurance has become a standard practice for most. However, many entrepreneurs hesitate to sign up due to the relatively high costs. Still, securing insurance is essential for sustainable, long-term growth and peace of mind.

In fact, business insurance cost is not fixed and fluctuates based on several factors, but there are ways to reduce these costs. Keep reading to find out how.

Average Cost of Business Insurance

There is no single insurance cost for businesses because rates aren’t one-size-fits-all, as many factors influence the premiums. These include:

• The company’s regional location and branch distribution;
• Historical and statistical data;
• The number of previous incidents reported;
• The scale of the enterprise;
• The inherent risk of the business’s activities and the products it deals with are among others.

That being said, it is still possible to provide some averages by looking at a variety of providers across the US.

The costs shown in the table are generalized. Individual policies may vary based on the specifics of each business and unique circumstances, which will be discussed below.

Costs for Different Types of Small Business Insurance

How much does business insurance cost? Well, the answer varies. It depends largely on the types of coverage and the scope of protection your policy provides. Although these are not all the factors that affect the price, they are among the most important.

In the context of small business, the following common types include:

• Business Owner’s Policy (BOP);
• General Liability Insurance;
• Commercial Property Insurance;
• Professional Liability Insurance;
• Workers’ Compensation Insurance;
• Cyber Liability Insurance.

Let’s take a closer look at each of these options.

Business Owner’s Policy (BOP)

The most optimal business insurance rates can be found in the BOP policy, as it combines the terms of General Liability and Commercial Property in one package. This comprehensive, cost-effective option for small businesses is designed to streamline your coverage while saving you money.

On average, a BOP costs $684 per year.

General Liability Insurance

This policy shields your business from claims related to everyday operations. With this coverage, you’re safeguarded against things like bodily injuries, medical expenses, or even advertising claims.

The annual cost of the policy is usually around $504.

Commercial Property Insurance

This type of policy focuses specifically on covering losses due to damage to real estate used or property owned by the business. It even covers damage caused by natural disasters, such as hail or lightning, on the building or its individual elements.

The cost of business insurance of this type can range up to $1,800 or even more, depending on the property’s value.

Professional Liability Insurance

If your business provides specialized services, this policy covers damages caused to clients as a result of professional errors or negligence. For example, suppose a brand is engaged in accounting and makes a gross mistake that costs the employer reputational or financial losses. In that case, the provider will compensate for these issues under the terms of the agreement.

Expect to pay around $720 per year for this coverage.

Workers’ Compensation Insurance

This is a situational policy, but it is critically necessary if the company has an increased risk of injury to personnel. This includes financial, oil and gas, construction, logistics, repair services, and equipment maintenance industries that are particularly reliant on this policy. In such business segments, it is important to guarantee compensation to employees in cases of loss of health or ability to work due to workplace incidents.

The average annual cost of such a policy is around $540.

Cyber Liability Insurance

In today’s digital world, protecting your business from cyber threats is crucial. This optional but increasingly relevant policy protects the company from losses caused by digital incidents like damage from data breaches, cyberattacks, or digital disruptions.

The annual cost can be as high as $1,740, covering losses of up to $5 million.

Factors That Affect Your Business Insurance Costs

The cost of business insurance depends not only on the type. The above rates are generalized and may vary depending on a fairly large list of factors. These include:

• Type of business;
• Location;
• Coverage limits;
• Claims history;
• Business operations;
• Credit score;
• Provider;
• Policy type.

Let’s break down the key factors that impact business insurance premiums to better understand how they affect costs.

Type of Business

The price range for business insurance varies widely, depending largely on the nature of the enterprise. For example, office-based companies may only require basic general liability insurance that covers essential risks of their business. On the other hand, industrial businesses that operate heavy machinery or specialized production equipment face higher risks and, therefore, higher insurance premiums.

There is a clear correlation between a company's risk profile and the cost of insuring its assets, revenue, and workforce. The riskier the business, the more costly the insurance.

Location

The cost of insurance for a business also varies depending on the region where the company is located and operates. Thus, the cost will be influenced by both local tariffs, which depend on the level of economic development of a conditional state, and typical incidents inherent in that particular region. The level of crime and the prevalence of natural disasters can also significantly impact the cost. For example, a company located in an area prone to theft or natural disasters will likely face higher premiums due to the elevated risk.

Coverage Limits

The higher the payouts offered by the policy terms, the more expensive it will be for the business. This also applies to the depth of coverage, which can reach quite specific insured events, such as damage to a shop window caused by pets or wild animals. Customizing coverage to meet specific needs can drive up costs, but it also ensures better protection.

Claims History

The business insurance price will also depend on the number and cost of previous claims. The more satisfied claims are, the more risky the company is considered to be and the higher the rates are set for it. Insurers use claims history as a measure of risk, so maintaining a clean record can help keep costs down.

Business Operations

Depending on the type of business operations, the size of the workforce, and the inherent level of risk of daily activities, the cost for business insurance can vary. For smaller businesses, particularly those with fewer than 50 employees, premiums tend to be lower. However, companies with more hazardous operations will see higher insurance costs.

Credit Score

The price of business insurance will also depend on the company’s credit rating. In other words, the more actively a company attracts credit funds and the faster it repays its debts, the more trust it has. Accordingly, a reliable business can expect lower policy rates than a risky one. Thus, companies that demonstrate responsible financial behavior, such as repaying debts on time, benefit from reduced insurance costs.

Insurance Provider

The tariff policy of the insurer also plays a significant role in determining the price of the policy, which in turn is influenced by market size, geographic reach, and general economic outlook. Accordingly, you should compare the quotes from multiple providers and the terms of their policies to find the most cost-effective policy and reduce corporate insurance costs for business. Tailoring the policy to fit specific needs is another way to secure better rates.

Policy Type

The type of policy remains the most critical factor in determining insurance costs, coverage, and the amount of potential compensation. Please note that some brands offer comprehensive or personalized business policies, which can be more beneficial for small businesses seeking broad coverage at a reduced price.

How to Save on Small Business Insurance

Although the average cost of business insurance can vary greatly, there are several strategies to help reduce expenses. A comprehensive approach is key, and here are some steps to consider:

• Selecting the right coverages;
• Managing risks;
• Finding discounts;
• Stay claims-free;
• Bundle policies.