How much is Business Insurance

How Much Is Business Insurance: The Best Guide For 2022

Elena Hudgens
By Elena Hudgens 14 Min Read

Do you ever wonder how much is business insurance? Do you sometimes feel like your head is spinning from all the numbers and potential costs when starting or expanding your small business? 

If so, you’re not alone. Business insurance can seem like a world of its own, with prices and costs often hidden from view. It can feel almost impossible to know how much is business insurance right for your company or how much it will cost you in the long run.

That’s why it’s important to have a basic understanding of how business insurance works in the first place. 

This article will guide you regarding everything about business insurance. From the types of insurance your company needs to the cost of each policy, we’ll answer your question about how is much business insurance.  

What is Business Insurance?

Business insurance is one of the many legal considerations before starting a business. Business insurance is a kind of insurance that protects your business against financial loss due to risks such as fire, natural disasters, theft, and vandalism. 

If you own a gas station, a hardware store, or a restaurant, you’ll want to buy business insurance to protect your investment.

Business insurance protects a company from losses that may occur during the ordinary course of business. The kind of environment in which the company works will determine its potential risk factors, so companies evaluate their needs accordingly before choosing what coverage they need. 

There are several types of insurance for businesses, including property damage and legal liability coverage, and employee-related risks.  

Why is Business Insurance Important?

Business insurance should be included while deciding how much money you would need to start your business. To make sure small business owners are protected, they must carefully consider and assess their insurance needs. 

In a loss, they may have more personal financial exposure if they don’t properly need coverage. For this reason, it is suggested that you work with an experienced agent who can help you through this process or find one in your state at the state department of insurance or the National Association of Insurance Commissioners.

Here are some reasons you should consider getting business insurance: 

  • Protection against financial loss – Business insurance helps protect your company from financial loss due to risks such as fire, natural disasters, and theft.
  • Tax deduction – You can usually claim a business insurance deduction on your taxes if you buy the right policy for your business.
  • Risk management – Business insurance helps you manage the risk involved with running your own business. For example, if you own a restaurant, you can buy insurance to protect your kitchen equipment, counters, and fixtures against fire damage.

Nobody can predict when a disaster will happen or if there’ll be an argument. The only thing you, as the business owner, can do is to get insurance coverage and play it safe. Never forget that with proper business insurance coverage your company’s operations will run smoothly for years and nothing would disrupt its good financial standing. You’ll feel relieved and able to focus more on production, services, and revenue growth – all of which are necessary for any successful enterprise!

Types of Business Insurance

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Before knowing how much is business insurance, you must know its types. Here are some of common types of business insurance you might encounter: 

  • General Liability: Protects your business against claims made by third parties such as customers, employees, or public members.
  • Auto: Protects your business assets such as inventory, property, and equipment from damage or loss due to claims made by others such as accidents, traffic violations, or vehicle damage.
  • Commercial Property: Protects your business assets such as inventory, property, and equipment from exposure to natural disasters such as floods, earthquakes, and hurricanes.
  • Employers: Protect your business assets such as inventory, property, and equipment from exposure to employee theft or damage.
  • Health: Protects your business assets such as inventory, property, and equipment from exposure to medical costs such as medical payments, hospital bills, or preconditioning costs.
  • Homeowners: Protects your business assets such as inventory, property, and equipment from exposure due to natural disasters such as floods, earthquakes, and hurricanes.

No matter what stage your business is in, it’s important that you have the right types of insurance coverage. Startup businesses will find a lot of value in starting with basic policies, and more established companies may need to change their policy needs over time.

How Much Is Business Insurance?

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The price of business insurance can vary greatly depending on several factors, such as your company’s unique risk factor, where you buy your policy, and how long you want the coverage. These are the factors that influence how much is business insurance.

  • Industry – Certain occupations are inherently more risky than others, so companies that work in such professions will pay higher premiums. For example, construction companies generally have to pay more for the same type of coverage as advertising firms or e-commerce businesses. Workers’ compensation insurance can be particular, even drilling down to each employee’s job function and determining the cost of coverage for a given industry.
  • Location – Insurance rates can vary depending on where your company is located. This is especially true with workers’ compensation insurance since state laws dictate the coverage levels and how you purchase a policy. The location also plays a role in commercial auto insurance costs; premiums tend to be higher in places that have high-than-average claim rates, like cities.
  • Size – The more employees you have, the higher your business insurance premium. As a company grows, it becomes more prone to injury, accidents, and incidents at work. Larger businesses can expect to pay higher premiums than smaller ones with fewer employees or no employees who are exempt from state workers’ compensation mandates, saving them money on costly business insurance coverage.
  • Payroll – Workers’ compensation insurance is directly correlated to the size of your annual payroll. According to the National Academy of Social Insurance studies, the average cost for this coverage is $0.70-$2.25 per month, depending on your income. Insurers also use revenue as a measure of risk when it comes to general liability insurance – which means they think about more customers meaning there’s an increased chance someone will be injured or aggrieved somehow.
  • Coverage and deductibles – The amount of your policy’s payout and the circumstances in which it occurs impact the total cost of your business insurance. For example, a general liability plan with an aggregate limit of $2 million will have higher premiums than one limited to $1 million in aggregate limits. Choosing low deductibles increases costs for your business’s policies on top of all this other stuff!

Finding the cheapest business insurance policy is a priority for the cost conscience business owner, but always weigh the price against coverage. Make sure you are not underpaying or overpaying and seek balance.

To help maximize your savings, analyze your specific needs first to understand what they are going to be before purchasing a policy. This will make it easier for you in making such a big decision.

Analysis of contracts and exclusions should also be made beforehand so that no coverages can become necessary after purchase time has passed.

Finding the Right Policy for Your Company

Once you have understood how much is business insurance, you must compare different policies. Business insurance is a complicated area and can vary significantly depending on your company’s unique needs. That’s why it’s crucial to understand how business insurance works and what you need before shopping around for coverage.

Here are a few questions to ask yourself to ensure you get the right policy for your company:

  • What is the cash value of my inventory? – The cash value of your inventory is important when considering the coverage you need.
  • What is the value of my property? – You’ll want to know the replacement value of your property to ensure you have enough coverage.
  • What is the value of my equipment? – You’ll also want to know the replacement value of your equipment to ensure you have enough coverage.

When you are finalizing your insurance plans, seek the advice of a professional. An expert in this field will be able to help you select the most appropriate policies for your business which may lead to reduced costs and ensure that you have enough coverage; what is more important than anything else is that their input helps determine the right amount of insurance for you.

Average Insurance Cost

The cost of business insurance will vary from one insurer to the next, depending on the factors noted above. Some insurers are more upfront with average costs, which gives you a figure to index against as you shop for coverage.

A 2020 report by Progressive stated that the average cost for various types of insurance is as follows:

  • General liability – $53
  • Professional liability – $46
  • Commercial auto insurance – $187
  • Workers’ compensation – $86
  • Business owner’s policy – $84

To get the best business insurance, compare multiple prices. Some providers offer quick and easy online quotes, while others require a local agent or broker for pricing details. You need to ask if there are any discounts available.

How to reduce the cost of business insurance

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Even if your company is small, there are a few ways you can lower the cost of small business insurance. It would help if you always tried to minimize risks to save on the cost of insurance for your organization.

Insurance companies reward businesses that work hard at keeping worker and customer safety a priority, but they will penalize those with histories of accidents or negligence lawsuits. 

There are several ways to save money on your business insurance, but the best way is by having very few claims made against it. You can  earn discounts on your business insurance if you take these steps:

  • You can save on business insurance by bundling your essential coverages into one policy. For instance, a Business Owner’s Policy (BOP) combines business income, commercial property, and liability insurance.
  • If you pay your small business insurance premium in full at once, it will save you money.
  • As you can imagine, a safe business is less likely to have accidents that would lead to costs. Create a risk management plan to reduce the likelihood of these kinds of accidents at your place of work, job sites, and on the road.

Summing up

Small business insurance is an expense that may seem irritating, but the moment something goes wrong and the benefits kick in, you will be extremely thankful you invested. You might find it annoying at first to pay for small business insurance when nothing has happened yet. 

But what about during a worst-case scenario? It gives your employees peace of mind and yourself because they know there is help available if needed while allowing them to focus on work rather than negative thoughts, which can happen without protection.

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Posted by Elena Hudgens
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Elena Hudgens is an entrepreneur with 10+ years of experience. She started her journey by building her own e-commerce website on Shopify and turned her $1000 savings to millions in just 2 years. Soon she started different ventures in which she failed and succeeded. And now, she's on a mission to help other entrepreneurs with her life and business lessons.
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