How Much Does Small Business Insurance Cost? (2024)

Small business insurance costs anywhere from about $14 to hundreds of dollars a month, depending on the coverage types you buy, such as general liability, commercial property, business interruption insurance, inland marine, cyber liability and/or workers compensation. If you purchase all these coverage types, you could pay around $368 a month.

Average Cost of Insurance for a Small Business

A business owners policy costs $57 per month, on average, for small business insurance, but you may pay much more or less depending on the types of business insurance you buy. Here’s a cost breakdown of some common types of insurance that a small business owner may consider.

Sources: Insureon

How Is Small Business Insurance Cost Determined By Insurers?

Small business insurance companies consider several factors when determining your premium.

• The value of your business property.
• Business revenue.
• How many people are employed by the business.
• The age and size of your business.
• The type of business.
• The types of coverage.
• Your claims history.

General Liability Insurance Cost

General liability insurance costs around $42 a month, according to Insureon.

General liability insurance pays for lawsuits or claims if your business is responsible for someone’s injuries or damaging someone else’s property.

These four factors influence general liability insurance premiums the most:

• Building size. Bigger buildings invite more opportunities for accidents to happen. So if you operate in a larger facility with more foot traffic, you could pay more.
• Location. Businesses operating in high-risk areas with higher crime rates may pay more for liability insurance.
• Size of payroll and annual revenue. The higher your expenses or operating costs, the more you can expect to pay for liability insurance.
• Claims history. If you’ve filed general liability claims in the past, it could increase your premiums.
• Policy details. Coverage limits, deductibles and other policy details affect your business insurance cost. Coverage limits include the per-occurrence limit, which is the most the insurance company will pay for a single claim, and aggregate limit, which is the most the insurance company will pay during the policy period.

Product Liability Insurance Cost

Product liability insurance costs an average of $42 per month, or $500 per year, according to Insureon.

Product liability insurance is often included in a general liability insurance policy. While other factors will be considered, the main factor that will determine your premium is the number of lawsuits related to your products or services.

Commercial Property Insurance Cost

Commercial property insurance costs about $67 a month, according to Insureon. This is the median for a standard $60,000 coverage limit with a $1,000 deductible.

Commercial property insurance financially protects your business from losses if your business property is stolen or damaged by a fire, natural disaster or other problem.

Several factors can influence commercial property insurance costs:

• Location. Operating in a high-risk area prone to natural disasters can increase premiums.
• Building age and size. Insuring older or larger buildings will cost more than insuring smaller or newer buildings.
• Types of fire protection. Having a sprinkler system, fire alarms and easy access to a fire department may reduce the price of your premiums.
• Equipment costs. Commercial property insurance reimburses you for items lost or damaged on your property, so expect to pay more if you house expensive equipment.
• Types of perils covered. Similar to home insurance, you’ll pay more if you need to cover additional perils for your business, such as floods, earthquakes or employee theft.

Business Owners Policy Cost

A business owners policy (BOP) costs $57 per month, or $684 per year, on average, according to Insureon.

A business owners policy is general liability insurance, commercial property insurance and business interruption insurance bundled together, usually with lower rates than each policy can be purchased for individually.

The factors that impact BOP pricing are the same factors that impact general liability and commercial property insurance pricing.

• Building age and size. Insuring older or larger buildings will cost more than insuring smaller or newer buildings.
• Location. If the business is in a high-risk area prone to natural disasters, premiums will be higher.
• Types of fire protection. Having a sprinkler system, fire alarms and easy access to a fire department may reduce the price of your premiums.
• Equipment costs. If you have expensive equipment, expect to pay more for a BOP.
• Types of perils covered. You’ll pay more if you need to cover additional perils for your business, such as floods, earthquakes or employee theft.
• Policy details. Coverage limits, deductibles and other policy details affect the cost of business insurance.

Business Interruption Insurance Cost

The average cost of business interruption insurance is between $40 and $130 per month, or $500 and $1500 per year, according to Insureon.

If your business must temporarily close due to a loss covered by your policy, business interruption insurance pays to replace your income losses and pay operating expenses during that time. This includes lost revenues, mortgage, lease or rent payments, loan payments, taxes, payroll, relocation costs and training costs.

Three main factors will influence business interruption insurance costs:

• Revenue. Since business interruption insurance covers lost revenue, the higher the company’s revenue, the higher the insurance premium will be to cover that.
• Industry. Industries, like restaurants, are more likely to experience property damage and will pay a higher business interruption insurance premium.
• Your business’s property value. Generally, the higher the value of your commercial property, the more you will pay for business interruption insurance.

Inland Marine Insurance Cost

Inland marine insurance costs $29 a month or $350 a year, according to Insureon. This is the median cost for $5,000 in coverage.

Inland marine insurance covers your business if something happens to your property or products while in transit. This could include goods being shipped to or from your business, or property used for work purposes (such as lawnmowers or camera equipment).

There’s one primary factor that influences inland marine insurance: Equipment or product costs. Small business owners who need to transport expensive equipment or products can expect to pay higher premiums for inland marine coverage.

Cyber Liability Insurance Cost

Cyber liability insurance costs a median of $145 a month, or $1,740 a year, for small business owners, according to Insureon.

A typical cyber insurance policy limit is $1 million per occurrence limit, a $1 million aggregate limit, with a $1,000 deductible, according to Insureon.

Cyber liability insurance pays out if your business experiences a cyberattack. This type of insurance can cover the costs associated with repairing or rebuilding your business after a cyberattack, as well as legal fees and settlements.

There are several primary factors that impact cyber insurance costs:

• Industry. Companies that are more exposed to cyber risk may need policies with higher coverage levels and, therefore, higher premiums.
• Your company’s revenue and costs. The higher your revenue, expenses and operating costs, the more you can expect to pay for cyber insurance.
• Your network security. Strong network security practices, or a lack of them, impact your risk for cyber claims.
• The number of people who have access to your systems and data. More access rights may mean more risk, resulting in higher premiums.
• Your claims history. Past cyber insurance claims may impact future cyber insurance premiums.

Workers’ Compensation Insurance Cost

Workers’ compensation insurance costs $45 a month or $542 a year on average for businesses with less than $300,000 in payroll costs, according to Insureon.

Workers’ compensation insurance is a type of insurance that helps employees who get injured while working. The insurance company typically pays for medical expenses and lost wages, among other things.

In most states, you’re legally required to have workers compensation if you have at least one employee. But workers comp laws vary by state. For instance, it’s not required if you operate in Alabama with less than five employees or in Arkansas with less than three employees. Workers comp insurance is not required in Texas or Wyoming.

Three main factors impact costs for workers comp:

• Payroll size. The larger your company and the bigger your payroll size, the more you can expect to pay for workers compensation insurance.
• Employee job duties. Expect to pay more for employees who have riskier job duties. For instance, workers comp costs for office jobs will be lower than hands-on jobs like construction or mechanic work.
• Location. If you live in a monopolistic state, such as North Dakota, Ohio, Wyoming or Washington, you’re required by law to buy state-funded workers comp. You have no other options. But in other states, you can shop around for workers comp quotes on the private market.

Commercial Auto Insurance Cost

Small businesses pay, on average, $147 per month or $1,762 per year for commercial auto insurance, according to Insureon.

The cost of commercial auto insurance is primarily determined by:

• Industry. The risks associated with your industry will have an impact on your auto insurance costs.
• The fleet. The number and types of vehicles.
• Driving operations. How often are business vehicles being driven?
• Driving records. Your driving record, and those of your driver employees will be considered when assessing your risk and rates.
• Claims history. Your history of auto insurance claims will be considered.

Commercial Umbrella Insurance Cost

A commercial umbrella insurance policy costs small businesses an average of $75 per month, or $900 per year, according to Insureon.

Commercial umbrella insurance offers extra liability coverage once you’ve reached your policy limits on other liability policies. The main factors determining your commercial umbrella insurance cost are:

• Industry. The type of business and whether it’s open to the public determines the level of risk.
• Coverage. The amount of coverage you buy will directly impact the premium.

Errors & Omissions Insurance Cost

Errors & Omissions (E&O) insurance costs $61 per month or $732 per year, on average, according to Insureon. It is also called professional liability insurance.

If a customer sues your business over unsatisfactory work, pays legal costs and settlements. E&O insurance costs are primarily based on:

• Industry. The type of industry and its risk level.
• Coverage details. Coverage limits and deductible impact premium cost.
• Business size. Larger businesses are typically more expensive to insure.
• Business operations. Day-to-day operations impact the likelihood of lawsuits.
• Claims history. A history of liability claims increases your risk level and premium.

Contractor’s Tools and Equipment Insurance Cost

Contractor’s tools and equipment insurance usually costs about $14 a month or $168 a year, according to Insureon.

The primary cost factors are:

• Industry. The risk level of your business depends a lot on the industry.
• Tools and equipment value. Higher value tools and equipment means higher coverage and costs.
• How often the tools and equipment are moved. The more your items are moved, the higher the chance of something happening to them.
• Coverage type. You may choose named perils or open perils coverage, and your premium will be higher or lower depending on which you choose.
• Coverage details. Details like policy limits, deductible and other options impact your premium.
• Method of property valuation. There are several different methods of property valuation. The method you are using for your tools and equipment will make a difference in your insurance cost.

How To Lower Small Business Insurance Costs

Business insurance is an important way to protect a company from costly damages. It can be a significant expense, especially for small businesses.

One of the best ways you can save is by purchasing a business owners policy (BOP). A BOP bundles three essential coverage types: general liability insurance, commercial property insurance and business interruption insurance. It’s usually cheaper to buy a BOP rather than three separate policies.

Here are some more tips to lower business insurance costs:

• Shop around and compare quotes from multiple insurance companies.
• Bundle multiple policies together from the same insurer, such as property and liability insurance.
• Pay your premiums annually instead of monthly.
• Raise your deductible—if you can afford the out-of-pocket costs you’d pay to file a claim.
• Avoid risks that could lead to a claim.

Sources

• Insureon
• The Hartford