When you own a small business, having business insurance is crucial. If something goes wrong, such as an injury on your property, advertising error, or third-party property damage, you could be liable for significant sums. Understanding small business insurance costs will help you budget appropriately and figure out which type of insurance policies should you take out?
General liability business insurance, professional liability, workers’ compensation, and more can protect your business. If problems arise, you’re less likely to have to pay costs out of your business’s resources.
Here is an overview of the 10 most common small business insurance policies and their associated costs.
General liability business insurance
General liability business insurance covers issues like bodily injury, property damage, and advertising harm. Most small businesses should have some form of general liability insurance, especially if they lease or own commercial property.
Depending on the type of policy you choose and the coverage amount ($1 million per occurrence and $2 million aggregate is standard), plus individual business factors, you should expect to pay $25 to $42 per month. $42 is the average amount nationwide. Insurers will consider your business type, building size, location and condition, your business’s claims history and the specific policy details to arrive at your monthly premium.
Professional liability business insurance
Professional liability business insurance is often purchased by companies that provide services. This includes real estate agents, doctors, lawyers, and more. Malpractice insurance is a type of professional liability business insurance.
The median cost for professional liability insurance is $59 per month, with an average cost of $97 per month. Again, this will depend on the type of policy you purchase and the coverage amount. If the insurance company deems you a “good risk,” you are likely to pay less for this coverage.
Workers’ compensation insurance
Workers’ compensation insurance covers on-the-job illnesses and injuries. Most states require employers to purchase workers’ compensation insurance when they have a single employee. The median cost of a workers’ compensation policy is $47 per month, while the average cost is $111.
The average cost of a workers’ compensation claim is $40,000. The insurance will also cover lost wages and disability. The cost of your policy will depend on your state, your total payroll, the industry, what kind of jobs your workers perform, and your workers’ compensation claims history. Naturally, a policy for more dangerous professions will be more expensive than policies for office jobs.
Commercial property insurance
Your building and its contents should be insured, in case of fire or other loss. Commercial property insurance is typically $63 per month for a $60,000 policy limit and a $1,000 deductible. Insurers will consider the size of your building, the value of its contents, and how old the property is. They’ll also consider your safety and security practices, what kind of fire protection you have, and what kind of hazards you would like covered.
Some businesses opt to get a general business owners’ policy, which combines commercial property insurance along with general liability insurance. This often offers greater financial savings than purchasing each policy separately.
Liquor liability insurance
If your business serves alcohol, you’ll need liquor liability insurance. These policies may be required in your state. You’ll also want to make sure you follow any state-specific rules for insurance coverage. Some states, like South Carolina, require businesses that serve alcohol after 5pm to have a minimum of $1 million in coverage.
Business owners can expect to pay anywhere from $255 to $2,000 per year. The costs depend on what type of establishment you’re insuring. Bars are the most expensive, while retail policies are the cheapest. Again, owners often bundle these policies to save money.
Special event insurance
When you host a special event, it’s a good idea to take out a temporary insurance policy for the duration. Special event insurance typically ranges from $182 to $257. The length of the event, industry, location, and type of event will affect each policy cost. Typically, these policies cover up to $1 million for a single event, and $2 million in the aggregate.
Expect to pay more if your event involves alcohol or potentially dangerous activities. Healthcare businesses tend to pay the most in special event insurance, while nonprofits pay the least.
Cyber liability insurance
Data breaches and cyberattacks can damage your reputation in your industry, and cause significant financial loss. Cyber liability insurance covers losses stemming from these online attacks.
Business owners should expect to pay anywhere between $1,000 to $2,000 per year, on average. The cost of a policy will depend on what kind of sensitive information you collect and store, as well as the policy limit. Keep in mind that there are two different types of insurance: first party and third party. The nature of your business will determine which type of insurance to get.
Commercial auto insurance
When your company owns its own vehicles, you’ll need to insure them under a commercial auto insurance policy. The median cost is about $142 per month for a $1 million policy. However, the premium is affected by how many vehicles you own, their value, how they’re used, and more.
The type of coverage you choose will also affect the policy costs. Finally, insurers will consider your employees’ driving records—the better they are, the less you’re likely to pay.
Directors and officers insurance
Directors and officers insurance protects company executives. If you’re sued for making a bad decision, leading to financial loss, this insurance can cover the expenses. The cost of a directors and officers policy largely depends on your company size, revenue, debt, type of company, and claims history.
The median directors and officers premium is $103 per month. The majority of small businesses pay under $1,500 per year for this type of insurance policy.
Business interruption insurance
Finally, business interruption insurance helps cover temporary closures and catastrophic losses. If your company is forced to close due to fire, flooding, or other disaster, these policies will help cover the lost revenue and more.
Expect to pay between $40 and $130 per month. However, businesses with higher levels of risk or more valuable commercial property may pay more. You may be able to bundle this type of insurance with your commercial property insurance, to save money.
Find the financial support you need
Owning and operating a business comes with a lot of financial considerations. Finding robust, affordable insurance policies is just one facet of your overall duties. This overview should help you become familiar with common policies to invest in. The better protected you are, the more likely your company will thrive.