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How much does business insurance cost?

In 2017, the national average monthly cost of a new 12-month business insurance policy ranged from $50 for professional liability to $192 for workers’ compensation.

Policy                                                 Average Cost                                               Median Cost

Workers' Compensation                    $192/month                                                $157/month

Business Owners' Policy (BOP)         $61/month                                                  $54/month

General Liability                                  $52/month                                                  $49/month

Professional Liability                          $50/month                                                  $42/month

Notice how the cost depends on the type of policy you need. This is because each policy protects against different types of risk, and these differences are factored into the price.  So, can you expect to pay the average rate? Not necessarily.  Your final rate depends on the details of your business. Also, averages don’t always tell the whole story. For example, the average monthly cost for a business owners policy was $61. However, the median monthly cost was just $54. This suggests that a few expensive outliers could’ve skewed the average price higher than what most businesses paid.

The cost of your policy is calculated using several basic factors. Learning how these factors influence your cost can help you secure the best combination of price and protection for your unique situation. 

Factors that affect your business insurance costs

Many factors play a role in calculating your business insurance cost. The most influential usually are your profession, number of employees and coverage needs. These factors can vary significantly from business to business.

Profession

Not all business types carry the same amount of risk. A business type known to have higher risk can expect to pay more than a business with lower risk. Tree trimmers and contractors are examples of higher risk businesses. Their work is physical and often includes using power tools on other peoples’ properties. These factors increase exposure.  In contrast, a home-based financial advisor doesn’t share these risks, so they won’t be factored into their rate. Will they pay less? Probably, but not for certain. Professional services are exposed to a different type of risk, and they often need carry professional liability insurance to stay safe.

Number of employees

Businesses with several employees can expect to pay more for insurance because their potential for claims are higher than a business with fewer, or no, employees. Each additional employee increases exposure to accidents and other mishaps that may result in a claim.  If a business has employees, it needs to carry workers compensation coverage. This is required by law in almost every state, and it adds to the cost of insuring your business.

Coverage needs

The amount of coverage you select has an impact on your premium. For example, a small business policy with a $1 million/$2 million aggregate, will generally cost more than a policy with a $1 million/$1 million aggregate.

What is an aggregate limit?

An aggregate limit is the most an insurance company will pay toward a claim during a policy term. If your policy limits are $1 million/$1 million aggregate, you’re covered up to $1 million for a single incident, but no more than $1 million for the policy term. The length of your policy term ultimately depends on your carrier, but annual terms are the most common.

For example, a carpenter is sued by 3 clients over the course of a year due to damages caused by faulty workmanship. Each client sues for $500,000, totaling $1.5 million. Individually, each incident is under $1 million, which meets policy limits. However, the annual aggregate amount is exceeded, meaning the third incident will not be covered.

These coverage levels typically can be adjusted to meet your specific needs, and they affect your final rate.

These three factors represent the basics, and every small business owner should be familiar with them. Of course, there are other factors that can affect your business insurance costs including:

  • Property

  • Equipment

  • Location

  • Time in business

  • And more

There’s a lot to consider when insuring your business, but getting help is easy. Just try to make sure you talk to someone with experience in insuring small businesses. Learn which business insurance coverages you might want to consider for your business.

Getting the cheapest business insurance

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.

Of course, you have questions. Help take the guesswork out of finding your best small business insurance cost and coverage combination by speaking with a licensed professional. They can walk you through the process and customize a quote specifically for your business. Call us today, or start a quote online. It’s that simple.

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