Small Business Insurance Cost: All You Need To Know

Starting a new business? This article will browse you through all the details about small business insurance cost.

Starting a new business is all about taking on new challenges and entering a competitive market. For a small business, there are so many financial struggles that can stress the owner out very easily.

If you are stressed about operating your small business, you should consider getting small business insurance. Small business insurance is a very smart way of saving yourself from financial trouble and working your way upwards in the business market. It helps in bringing confidence to take the leap in the business market more boldly.

The question then arises: how much does small business insurance cost? Well, it varies from person to person. Small business insurance is different from other insurance because it involves business. Here is a full guide to small business insurance cost:

What is Insurance?

Insurance is a contract that you sign with an insurance company to gain benefits based on monthly payment, called premium. The contract contains all the policies set by the government and the company that you have to follow to get those benefits. Insurance covers specific risks for you depending on what you sign for.

Insurance is a way of protecting yourself and your loved ones from financial loss. It makes your life more organized and stress-free so you can live a better life.

What is Small Business Insurance?

Small business insurance is a kind of insurance that prevents financial loss while operating a small business. It is a contract that contains policies that you sign with an insurance organization.

Small business insurance protects the assets, income, and property of your business. Every insurance plan is different from another depending on what type you are singing with. Small business insurance cost is dependent on how much you can manage on a premium.

What does small business insurance cover?

Small business insurance covers different services for you based on the plan that you are subscribed to. Start up business insurance costs are very important to know for any business owner.

Your business needs are the main priority and based on those needs, the small business insurance cost is calculated. Furthermore, it also depends on the situation of your business. If it is doing well in the market, you do not have to pay a high price, but if it has a financial loss then you are most likely to pay more.

Small business insurance abides by a business owner’s policy that prevents financial loss and covered peril. A covered peril is a business insurance term that refers to any kind of loss you might face, for example, theft on your business or fire. Small business insurance is like the coping strategy to any risk taken.

Small business insurance has certain coverages that a business owner must know. These policies differ from one another so you have to be sure that you are signing the right one.

Business Owner’s Policy (BOP)

Before we dive into the small business insurance cost details, you should know about the business owner’s policy that plays an important role while signing the contract.

Business Owner’s Policy is signed by those owners that own small business and their annual revenue is less than 1M. It is the most common insurance package that many owners sign for the sake of saving themselves from any loss.

An insurance plan that contains BOP in their contract is usually for a basic package that covers the protection of property, interruption in business, and liability threat that a small business might face when operating a competitive market.

Business Owner’s Policy is really complex because it comes with certain coverage limits and deductible depending upon the plan you sign. Knowing these in detail can help in determining how much a startup business insurance costs.

Property Coverage

As mentioned before, BOP offers coverage of property where the insurance company protects your business in case the property is damaged due to some accident. For example, if your business property is affected by a storm or water, then the insurance will help in paying the cost.

However, the policy for peril damage is mentioned in the contract and is only covered if the damage falls under that category. There are insurance plans that might give you the option of open-peril but that depends on the small business insurance cost you are signing to.

Business Interruption Coverage

If your business is interrupted by a financial loss due to some damage, the BOP states that the insurance company will help in recovering from that damage. This can also include the cost of renting out a temporary location to operate the business while the original property is restored.

Business interruption coverage has a specific date within which it is applied. The basic insurance plan offers a 30 days limit, but if there is an endorsement then it might extend to 360 days. Every business situation is different so the coverage differs case by case depending on the policy you sign.

Liability Protection

Liability protection is mentioned in the BOP once you sign an insurance plan. Liability protection has to do with protecting the business from financial loss by paying for any damage caused by the business.

For example, if a customer faces a problem while using the product or service offered by the small business, then the legal cost that is needed to be paid by the business owner can be covered by the insurance company.

Liability protection is very important for those business owners who launch new products. They save themselves from the stress of dealing with legal claims by the customer. Liability protection does not cover the criminal acts that might be committed by the owner, the claim should be legally recognized in order to gain the payout from the insurance company.

Liability protection differs from one insurance plan to another, so it is important to read policies before you sign under contract with someone.

Small business insurance cost determines the facilities you might receive from the insurance company.

Types of Small Business Insurance

As mentioned above, if you sign an insurance plan that covers the Business Owner’s Policy, then it combines all the property and liability policies into one insurance package.

But there are some insurance plans that might fit the criteria of your small business insurance cost.

Commercial Property Insurance

Commercial Property Insurance is a type of insurance that covers property damage including equipment and tools of the small business. If you are a business that operates using expensive tools or equipment, then this insurance gives you the facility to not worry about the damage in case of an emergency.

For example, if there is a severe earthquake or flood that damages your furniture badly if you have this type of insurance signed, then the damage can be recovered with the help of the insurance. You will have to pay less compared to the original cost because of the premium that you have been paying to the insurance company.

Commercial Property insurance has different policies, so it is important that the policies that are most relevant to you are chosen.

General Liability Insurance

General Liability Insurance is a type of insurance that protects your company from any legal claims that a customer might sue you on. This also includes any kind of slander that a person might inflict on your business.

This type of insurance is usually for those who have to deal with customers in daily life or make products that are sold in the market. There are times when customers might legally sue or claim about the product which can cause the small business a big loss. General Liability Insurance covers the cost of damage for the owner.

For example, if a person comes into your store and gets injured by any of your furniture, then the general liability insurance plan will pay the medical bills for the injured, instead of you paying it out of your pocket.

Worker’s Compensation Insurance

Worker’s Compensation Insurance is a very important plan for small businesses that have employees working under them. Worker’s Compensation Insurance is a type of insurance that covers the medical bills or any other damage of the employee.

Worker’s Compensation Insurance is mostly subscribed by the factory small business that has labor who lifts and loads heavy machinery or goods that might inflict damage on them. Worker’s Compensation Insurance covers the medical bills as well as the financial loss that the employee faces due to the injury.

For example, if your employee injures their knees due to some accident on the business premises, then the insurance will cover the surgery or other medical complication for you, you will save yourself from paying the heavy cost.

Cyber Insurance

Cyber Insurance is an essential plan that protects your small business from the hands of hackers. Small businesses are always at risk of getting their data hacked because they lack tools and software that might protect them from data breaches.

Running a small business is already a financial challenge, so you might not be able to afford expensive software. Furthermore, the data of your customers is important so you cannot risk any breach at all.

Cyber Insurance protects your business in case your data is hacked. They are responsible for informing the clients and hiring the best firm to recover from the loss so that even if you are not aware of these things, the insurance company can handle it for you.

For example, if someone hacked into your system by installing a virus that is putting your customer data at risk, the insurance company will contact the best monitoring service firm and PR firm to deal with customers for you.

Which Small business Insurance cost best for you?

After reading all of the above insurance types you might wonder: how much business insurance do I need? Well, this depends on what type of small business you are running. The small business insurance cost is to be paid by you, so you have to decide which one is best for you.

Here are some components that you should know so you can choose the best small business insurance plan for your business:

Deductibles and Limits

Deductibles are the amount you have to pay after which the insurance company pays the amount. Limit is the amount you can get insurance to cover for you. If it exceeds that limit, then you have to pay from your own pocket.

There are limits and deductibles set by the insurance plan based on your premium. If you pay a high premium, the limit and deductibles will be more convenient. The higher the deductible is, the more expensive premium you have to pay.

The small business insurance cost can be determined based on what type of business you are running, for example, if you are running a tech startup then you might need data breach insurance more than commercial property insurance.

Business Earnings

Business earnings are the income and the size of the industry that you operate. Insurance plans differ in terms of income size. Furthermore, the bigger your small business is, the more it is liable to risk and damage. It is important for you to choose an insurance plan that fits your business earnings deeply.

For example, if your small business has electrician employees, general liability insurance might be suitable for you since your staff is working on the physical property of someone else. If there is an accident, then your company might be blamed for it, so it’s better to have an insurance plan that can cover the damages. You need to know how much does a $1 million dollar business insurance policy cost.

By taking these situations into account, you can choose the best insurance plan for yourself. If you struggle with some issues in your business, it might be solved because of insurance plans because they help in preventing any financial loss to you.

Employee Population

Small businesses tend to have few employees. The number of employees working in your startup, full-time, determines the insurance cost for your business.

This is especially important for those who have labour under their company. They have to buy the worker’s compensation insurance in order to ensure that you do not suffer from any kind of financial loss because of an employee.

Most small startups have around five employees hired for the services. So, the insurance cost will differ based on the employee population.

Years in Business

It is important to know how many years since the business has been operating. Usually, small businesses are 5 years or less old. This can affect the cost of premiums for the companies.

Insurance premiums cost less for the companies that have been operating in the business market for 5 years.

How much does small business insurance cost?

Small business insurance cost can be determined based on your financial needs. Whether you need property protection or worker’s protection insurance, it all depends on you.

Most small businesses opt for insurance plans that include Business Owner’s Policy in their contract. The Business Owner’s Policy includes all the requirements as it combines three different insurance into one. But there might be exceptions where BOP is not suitable for you, or cost-effective for you.

Factors for Commercial Property Insurance

The average cost of commercial property insurance for small businesses is around 63 dollars premium. But this also depends on the policies of the insurance company.

The factor that can affect the cost of commercial property insurance is the property itself. If your small business is in a geographical location that is prone to disasters or has less land value, the premium costs will differ very deeply.

The building also plays a role in determining the insurance cost. If the building is too worn out and old or if it is factory-size huge or a small commercial plot. All these factors determine the cost of small business insurance. Furthermore, if your business runs using equipment then the size and amount of equipment tools are also calculated in the cost.

Factors for General Liability insurance

General Liability insurance is most common in small businesses which can cost around $28 per month. This insurance plan is the least expensive and provides basic facilities that you might need in your business. But if you buy general liability with BOP, then it will cost you around $53 premium, which means in a year you have to pay $636.

The factor that affects the cost of general liability insurance is determined by the number of target customers or customers, in general, you manage for your business. If you own a place that might risk the customers’ safety then the cost will be more. The industry of your small business is also a great contributing factor to the cost of general liability insurance.

Factors for Worker’s compensation insurance

For worker’s compensation insurance, you have to pay an average cost of $111 per month based on the company you have signed with and what policies they offer.

Many countries require you to buy this insurance for the employees for the sake of risk management and policies. For worker’s compensation insurance, the small business insurance cost is determined by the industry the company belongs to, the salary of your employees, and the reputation of claims by your employees’ history.

Factors for Cyber insurance

Cyber insurance is mostly signed by tech companies but other companies can also sign it depending on their business needs and requirements. Cyber insurance cost is dependent on the importance of data. In other words, how much does the data have an influence on your business?

Furthermore, it is important to know that coverage an insurance plan can give in case third-party claims can be covered for the data breach. It also helps in recovering the financial loss caused by viruses or malware spread on the business computers that are used for business earnings.

Commonly, there are three types of businesses that opt for cyber insurance, namely:

  • Personally identifiable information (PII)
  • Protected health information (PHI)
  • Payment card industry data (PCI)

These businesses are at high risk of being hacked. The cost of each business’ industry is a factor when subscribing to cyber insurance plans.

Instead of focusing on the small business insurance cost, you also have to see what the insurance company is offering. There are times when an insurance plan that suits a consultant might not suit an electrician or a grocery store owner.

How to pick your small business insurance?

The best way to buy is to select the plans for the small business insurance cost. You can go around and see which one business owners of your profession are choosing to sign for and then select that one.

There is a whole big market of insurance companies that offer different facilities and benefits with varying costs. The amount mentioned above is an estimated average amount that most insurance companies offer to their clients.

You can also pick by knowing small business insurance cost through financial advisors. There are many freelance financial advisors who help in signing the right insurance plan based on your company’s performance. They analyze your revenue and standing in the business market so that the insurance plan you buy is cost-effective.

You can also buy insurance plans online through different companies and save time. There are online websites that take online applications and show plans with details from which you can subscribe after filling in your personal and business information.

Conclusion

Now that you have read the article thoroughly, you not only know the small business insurance cost but also the different insurance plans and types that you can choose from. Signing for insurance plans can be challenging and time-consuming since you cannot decide on which plan is best for you. So, instead of wasting time on useless information, now you know the right way of choosing the best small business insurance plan.

If you are hesitant about buying any insurance plans at all, you should not be. The earliest you buy insurance, the more you will prevent yourself from being at risk of financial loss. When you have an insurance plan on premium, you become confident to take risks in the business market and become successful.

Before signing an insurance contract, make sure to do more research about the plans and insurance companies that offer you the best deal.

Sandra Johnson

Sandra Johnson

Sandra Johnson was a few years out of school and took a job as a life insurance agent in California, selling coverage door-to-door for Prudential. The experience taught her about the technical components of insurance and its benefits for individuals and society, as well as the misunderstandings people often have about insurance. She has over ten years’ experience in the insurance industry, having worked as both a Broker and Underwriter, assisting clients across a broad range of industries. At Insurance Noon, Sarah diligently gathers all the required information and curates up pieces to provide meaningful insurance solutions. Her personal value proposition is to demonstrate a genuine interest in always adding value for clients.Her determined approach to guiding clients has turned her into a platinum adviser to multiple insurers.