Insurance is a necessity for most small businesses, but the cost of small business insurance coverage varies widely from one company to the next depending on the size and nature of your business.
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The extent of your small business insurance coverage will depend on your company’s specific needs. For example, a sole proprietor may not need coverage for workers’ compensation, while a business owner with a storefront and multiple employees will.
The average cost of small business insurance is about $400 to $800 per year or $34 to $67 per month — but as you can assume, purchasing more coverage will make you incur additional costs.
For example, you might invest in a business owner’s policy that costs $100 per month and add general liability coverage that runs you another $50 or $60 per month.
In 2021, the median monthly cost of a business insurance policy for new Progressive customers ranged from $42 for professional liability to $68 for a business owners policy (BOP).
| Policy | Median Cost | Average Cost |
|---|---|---|
| General Liability | $48/month | $65/month |
| Business Owners Policy (BOP) | $68/month | $101/month |
| Workers’ Compensation | $65/month | $111/month |
| Professional Liability | $42/month | $56/month |
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It makes sense because the more you make, the more exposure you have (and the more you have to lose). And the more exposure you have, the more coverage you need. The cost of your policy rises with the level of risk exposure.
The price of business property insurance and liability insurance varies by state and zip code. For example, rural areas can have higher property rates compared to urban areas. One reason is that fire departments or fire hydrants are less accessible.
However, a shop in an urban area might pay more for liability insurance. That’s because there is more foot traffic in their location compared with a country general store. (More foot traffic=more risk.) Location also determines your cost of small business insurance.
While your company may have its own specific risks that require additional coverage, the following are the costs of common policies that cover most scenarios that small business owners may face. A wider variety of policies you particularly may need can be found listed further on.
Typical cost for general liability insurance is $46 per month, but it can be as low as $21 and as high as $166 ($250 to $2,000 per year). The price varies depending on your industry, years of operation, number of customers, revenue, and claims history.
General liability insurance protects your business in case either you or your employees cause third-party damage, bodily injury, or related situations. These policies cover costs related to lawsuits and claims, including investigations, settlements, legal fees, and damages.
Typical commercial property insurance costs $85 per month, but the rates can range from $42 to $417 ($500 to $5,000 per year). The premiums vary based on your location and assets.
Commercial property insurance protects your company’s property, assets, and equipment from damage, theft, and breakdown, and will replace lost revenue.
The typical price for a business owner policy (BOP) is $100 per month. Depending on your assets, location, and risks, the rates can range from $42 to $292 per month ($500 to $3,500 per year).
A BOP is a policy package that combines key insurance coverages that most small businesses require. The typical business owner policy includes general liability and commercial property insurance.
Most professional liability insurance policies cost $60 per month. The rates range from $40 to $84 per month ($500 to $1,000 annually) depending on your industry, location, employees, coverage, and limits.
Professional liability insurance protects your business if a customer or client claims your service caused damages that lead to losses and decides to take legal action.
Common errors and omissions policies cost $145 per month. Depending on your profession, location, clients/customers, and number of employees, the premiums can range from $75 to $167 per month ($900 to $2,000 annually).
E&O insurance covers your business from claims of negligence, mistakes, and oversights during the course of your work.
Most workers’ compensation insurance policies are paid for each employee and cost $38 per month. Depending on your location, industry, and employee salary the rate per employee can range from as low as $5 all the way up to $240 per month ($35 to $2,876 per year).
Workers’ compensation insurance covers medical costs and lost wages resulting from on-the-job injury or illness. It provides protection for employees so they are not responsible for their own medical costs. Additionally, it prevents employers from getting sued for related expenses.
A typical cyber liability insurance policy costs $92 per month. The premiums range from $63 to $667 a month ($750 to $8,000 annually) depending on factors including risks, industry, revenue, and location.
Cyber liability insurance policies protect businesses from liabilities, damages, and losses related to data breaches and other cyber attacks.
Businesses in highly populated areas or places prone to natural disasters will likely pay more for policies compared to more rural locations with fewer occurrences of flooding, hurricanes, or wildfires. Here are some average costs for general liability business insurance based on location.
High-risk businesses will have higher insurance costs. For example, a brick-and-mortar store or small construction company will have more risks than a sole proprietor who works as a freelance copywriter. Here are some average monthly premiums for a business owner policy in various industries.
The most significant factor that influences your small business insurance cost is your profession. The following are some examples of policies for different industries, including what they cover and their prices.
Most restaurant insurance policies cost around $300 per month. Depending on your revenue and location, premium prices range from $88 to $840 per month ($1,050 to $10,000 per year).
Restaurant insurance policies cover claims related to foodborne illness, customer harm, third-party property damage, personal property damage, and business interruption.
Typical policies cost $89 per month. Depending on your service, coverage, and claims history, rates can be as low as $39 and as high as $89 per month ($468 to $1,068 annually).
Plumbing insurance covers lawsuits and other liabilities from injuries and damage to a client, third-party, or their property while conducting installations, repairs, or any other service.
A typical retail insurance policy costs $49 per month. Depending on your business, location, and coverage, premium rates can range from $39 to $49 per month ($468 to $588 per year).
Retail insurance policies protect your business from liabilities related to harm to customers and third parties and damage to your own store.
Common IT consultant policies cost $89 per month. Costs vary based on your provider, specialty, and customers, but premiums range from $39 to $289 per month ($468 to $3,468 annually).
IT consultant insurance protects your business against third-party injury and property damage, and any mistakes you make that could harm a client and result in losses.
Finding the cheapest business insurance policy is a priority for the cost-conscious business owner, but always weigh the price against the coverage. You don’t want to pay for coverages you don’t need, but you also don’t want to be underinsured if something happens. Seek balance.
To help maximize your savings, analyze your business first to understand your specific needs. Be sure to include any contractual requirements and rule out any inapplicable coverages. Be informed.
You can save money by adjusting your deductibles. A deductible is the amount you pay out of pocket toward a covered loss at the time of a claim. Generally, the higher your deductible, the lower the cost of your annual premium. Just be sure you’re comfortable paying the deductible you select.
The best way to save money on your business insurance is to have very few claims made against your policy.
Insurance companies reward businesses that are diligent about worker and customer safety but will ding those with a history of accidents, workplace injuries or negligence lawsuits.
You can often earn discounts on your business insurance if you take the following steps:
Bundle your coverage. Most insurance providers offer discounts if you combine multiple types of business insurance into one policy, such as a business owner’s policy.
Prepay your annual premium. Your insurer may offer a discount if you pay annually rather than monthly.
Adjust your deductibles. Typically a higher deductible equals a lower premium.
Invest in workplace safety. Minimize your risk profile by offering formal safety training and keeping up with routine facility maintenance.
Regulating Agency and References
Insurance Information Institute (III)
This organization’s mission is to improve public understanding of insurance – what it is and how it works.
Visit us at https://www.iii.org.
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