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Average Cost of Small Business Insurance

The individualized nature of small business insurance makes it difficult to estimate the cost without getting a quote from an insurance agent. Due to the different components that make up small business insurance and the factors that determine the actual cost, the price can vary widely from one business to the next. Nevertheless, we’re going to do our best to answer the question, “What is the average cost of small business insurance?”

How Much Does Small Business Insurance Cost? 

While the factors involved in pricing makes it hard to nail down a price that’s likely to be representative of your business and insurance needs, here’s a list of one insurance company’s average rates for 2019 to give you a general idea:

  • Worker’s Comp: $85
  • Business Owner’s Policy (BOP): $80
  • General Liability: $53
  • Professional Liability: $46

The difference between types of business insurance can be confusing so let’s go over each one individually.

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Worker’s Comp

Also known as workman’s comp, worker’s compensation, or disability insurance, this plan covers worker illness or injury. It protects the employee from lost wages and covers medical costs in the event of an accident or other debilitating condition. It also protects the employer from being sued for negligence if a worker is hurt on the job. Some states require it while others may not. As similar policy to worker’s comp is called EPLI insurance.

Business Owner Policy

A business owner policy (BOP) is a kind of package deal insurance that includes coverage for all the basic types of insurance a business owner is most likely to need, like property and liability insurance, which is sold at a discount because it is bundled.

General Liability

General liability insurance (GL) protects the business owner from claims related to property damage and personal injury.

Professional Liability

Professional liability insurance (PLI) is insurance for certain kinds of business owners who are susceptible to claims such as malpractice or negligence.

What Affects the Cost of Business Insurance? 

The cost of business insurance can be affected by a few different things. Let’s go over each of the most prominent factors in business insurance pricing and break them down.

Profession

The kind of work a business owner does is a huge factor in determining how much they’ll pay for insurance. Imagine the risks involved in running an electrical company compared to that of an accounting firm. They will have different insurance needs based on their risks and liabilities.

Number of Employees

The more employees a business owner has working for them, the more people they’re responsible for, and the higher their insurance rates are likely to be.

Breadth of Coverage

The more situations that are covered and the higher the insurance payout, the higher the insurance cost will likely be.

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How Much Does Small Business Insurance Cost by State? 

Each state makes its own business insurance rules. Some states will require worker’s comp insurance while others don’t. Also, property values can change some insurance rates by quite a bit as well. Some states will have minimum coverage levels which can be different in each state. Those factors, along with the highly individualized nature of business insurance, are why there’s no master list of small business insurance costs by state. Different businesses in the same state will have drastically different costs as well.

To give you a general idea of how insurance prices can vary by state, here are some state averages for how much business owners pay for workman’s comp insurance per every $100 of payroll:

  • Illinois: $2.23
  • Indiana: $1.05
  • Missouri: $1.92
  • Michigan: $1.57
  • Iowa: $1.68

This means that for every $10,000 of payroll, an employer in Illinois pays an average of $223–a full $118 more than in Indiana.

Where Do You Get Business Insurance?

Small business insurance companies often provide a wide range of coverage for different kinds of businesses. To find the right insurance company and coverage for your small business, you may want to consult a specialist. An independent insurance agent can help you find the right coverage from any one of multiple insurers. However, they work for the companies. An insurance broker does the same thing except they work for you, so that may be the best place to start. They’ll walk you through the specifics of the coverage you need and what each insurer can provide for what price.

Do You Need Business Insurance? 

Many people wonder if business insurance is actually necessary and the short answer is yes. Some states require different types of businesses to have business insurance. Even in the cases where it isn’t legally required, if you forgo coverage and an incident occurs, you could be responsible for paying for property damage out-of-pocket or even be sued by a client or employee and be put out of business if you can’t afford to pay. This is not typically an area where any business, especially a new small business, can afford to take chances.

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Bottom Line

Small business insurance is never going to be a one-size-fits-all situation. Every business will have different needs based on the many factors listed above. It’s important to find the right business insurance for your needs without paying an arm and a leg though. This is one of the times when just finding the lowest price quickly can have nasty consequences later. Take your time, make sure you understand the different coverage options and find the plan that works best for you for the best price, without cutting corners on coverage.

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