How Much Does Small Business Insurance Cost in the United States?

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How much does small business insurance cost? Your business insurance cost depends largely on the size, location, industry, age and loss history of your business.

If you own a small business and you want to secure a business insurance policy for it, one of the first questions you are likely going to ask and need answers for is how much does a small business insurance cost? 

You would want to arm yourself with the value of an insurance cover for your small business so you do not incur costs and expenses that are way over the board for your business. You will need to learn how to compare business insurance quotes.

It is not completely easy to say how much a small business insurance cost because insurance premiums are quite difficult to predict. The uncertainties which plague the predictions of insurance premiums can be attributed to a variety of factors. 

Notwithstanding, we can provide estimated figures and predict with some dose of accuracy what the cost of an insurance policy for your small business will be.

Small Business Insurance Needs

Whether your business is a small one or you have grown to become a big brand, it needs insurance. We have outlined some of the reasons why your business needs an insurance cover. 

If you are of the opinion that the size of your business prevents you from acquiring a business insurance policy, then you are greatly mistaken. No matter the size of your business, it is susceptible to general business risks and threats. An insurance cover will help cushion the effect these risks and threats will impose on your business.

Related: At What Point Does an Online Store Need Business Insurance?

Every small business needs to purchase any of the following insurance policies:

1. Property Insurance 

This insurance policy compensates your small business when the property used to carry out your business activities gets damaged due to fire outbreaks, vandalism, break-in, or theft. 

The property insurance policy does not only cover the building and structure where you carry out your business but also the furniture, inventory, products, computers, accessories, and other items you use in doing business. 

2. Errors and Omissions Insurance 

If your business’s services encompass making recommendations, giving advice, or any kind of service, you can become a victim of lawsuits filed against you by unhappy customers who may feel your business ripped them off. 

These lawsuits may arise due to your business’s inability to perform your job’s description properly. 

The Errors and Omissions insurance policy covers for these lawsuits and legal claims. It will pay for the legal fees the insured is legally liable to pay while also providing legal defense costs even if there is no wrongdoing. 

Related: How to Choose the Best Business Insurance Company in the United States for Your SaaS Startup

3. Business Owner’s Policy (BOP)

The Business Owner’s Policy (BOP) is an all-inclusive insurance policy which contains all the types of insurance covers available to small business owners. It is made up of the general insurance coverage options for businesses. This policy is a cheaper alternative compared to getting individual insurance policies for your business. 

4. Product Liability Insurance 

This is a necessary insurance cover if your business deals with the manufacturing, distribution, and retailing of products. The Product liability insurance policy is to protect your products and get compensated when any of your products suffer a loss or damage. 

5. General Liability Insurance 

This is an insurance policy that largely caters to the financial needs of a business. The General Liability insurance policy protects your business from any financial loss you may incur during the course of your operations.

Related: General Liability Coverage: Protect Your Business from Liability Claims

6. Business Interruption Insurance 

Suppose a fire outbreak or break-in or theft causes your business to slow down or shut down temporarily, there would be effects on your profit in such a scenario as you may incur losses by virtue of your business inactivity. You can be compensated when you are forced to close your business doors as a result of perils or criminal activity when you have a business interruption insurance cover.

A Business interruption insurance cover provides financial support for your business should an unfavorable event cause you to stop operating either completely or temporarily. It will cover financial losses during your business inactivity period to the limit of the policy’s provisions. 

7. Workers Compensation Policy

Since you have people working for you, you are obligated by law to purchase workers’ compensation insurance policy. Any business that owns paid labor is mandated to acquire this policy for the sake of its employees.

Having looked at the various types of insurance policies for small businesses, it is important to consider some points which determine how much your small business insurance will cost. 

Factors That Determine The Cost of a Small Business Insurance 

The following are factors which determine how much your small business insurance will cost.

1. The Industry You Operate In

Certain businesses operate in a very hazardous industry. The hazards and risks that such businesses may suffer from cannot be compared with others. This disparity in hazards and risks makes for the inconsistency in the price of insurance premiums. 

A business with a high-risk rate will have a high business insurance cost. The higher the risk a business faces, the higher the cost of the insurance policy. 

2. Location

Where your business is located is also another determining factor in the cost of small business insurance. Insurance policy costs vary from one geographical location to another. The business insurance cost for a construction company in Texas, USA can’t be the same with another one in Pennsylvania.

Related: 7 Major Challenges Facing the Insurance Industry in 2020

3. Business Age 

How does your business age affect your business insurance cost? The age of your company will also impact the cost of your business insurance policy. A business that has become well-established and has been doing business for a long time would enjoy increasing revenue hence the cost of an insurance policy for such a business will be lesser. 

On the other hand, a start-up will be required to pay more for an insurance cover because its revenue channel has not been fully honed. 

4. Loss History 

If your business has no record of a loss or damage, it would be cheaper to get an insurance policy. Businesses who have suffered a number of losses will incur higher insurance cover costs than businesses with no prior record of losses. 

Related: 4 Major Factors That Influence Your Car Insurance Rates

How Much Does Insurance Cost for Small Business?

This section discusses the cost of the various kinds of insurance policies available to small businesses.

Average Cost of General Liability Insurance

The cost of general liability insurance varies by industry. The cost of general liability insurance for Yoga instructors is different for SaaS startups. 

The average fee for a general liability insurance policy is $500 USD. As we said, the cost of this insurance policy varies by industry. In a Photography business, the cost of general liability insurance is around $250 while the fee for businesses in the construction sector crosses the $800 USD mark. 

Business Owner’s Policy Cost

The cost of a Business Owner’s Policy falls within the range of $1,800 to $500 depending on the industry your business is domiciled in. 

Errors & Omissions Insurance Policy Cost

Businesses that are into building designs and architecture pay more for an Errors & Omissions Insurance Policy. They can pay up to $1,700 for this insurance policy. The guys on the cheaper end of this insurance premium are the accountants who pay an average of $400.

Workers Compensation Policy Cost

The average cost of the workers’ compensation policy is around $600. Businesses in the construction industry can pay up to $3,000 annually while accounting firms pay an average of $400. 

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There is actually no one-size-fits-all in how much small business insurance costs. There are factors that contribute to the inconsistency and disparity in the cost of small business insurance. The science behind the cost and estimates of small business insurance is one that requires a great deal of professional help. Contact an insurance broker today to know how much your small business insurance will cost.

Not many entrepreneurs actually take time to figure out how much health insurance cost a small business.

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