The Cost & Importance of Small Business Insurance

The Cost & Importance of Small Business Insurance

No matter the industry, small businesses need to protect their work and assets. While small business insurance can seem like a burden, it’s an important part of doing business. But how much should you be paying for business insurance? And how can you be sure your investments are properly protecting you?

Your small business insurance costs will vary based on factors like your preferred type of coverage and industry. If you’re searching for small business insurance, knowing some common prices for your line of work can help you navigate the various quotes you receive to choose the best policy and company for you.

Many insurance companies will offer combined coverage, which is important for multifaceted businesses. You might need to protect your assets, employees, customers, and income. One of the most common combined policy options includes a business owner’s policy (BOP), which usually includes property and liability coverage.

Importance of Small Business Insurance

Accidents happen, so you need to legally and financially brace yourself for them with proper insurance — you could end up in some serious hot water if you don’t.

Maybe, an employee gets hurt on the job. Or maybe, a customer slips and falls in your store. In cases like those, you need to cover their injuries with workers’ compensation or general liability policies.

And risks aren’t limited to physical injuries. For instance, a business could take some photos from an internet search for their in-store signage — only to be hit with a copyright lawsuit for using images without the expressed permission of the company behind the pictures.

A number of other potential unfortunate scenarios — like your business being robbed or your storefront damaged from a natural disaster — are entirely possible. And you’ll likely need small business insurance to account for those as well.

How Much Does Small Business Insurance Cost?

The extent of your small business insurance coverage will depend on your company’s specific needs. For example, a sole proprietor may not need coverage for workers’ compensation, while a business owner with a storefront and multiple employees will.

Average Cost for Small Business Insurance

The average cost for small business insurance is about $400 to $800 per year or $34 to $67 per month — but as you can assume, purchasing more coverage will make you incur additional costs.

For example, you might invest in a business owner’s policy that costs $100 per month and add general liability coverage that runs you another $50 or $60 per month.

Small Business Insurance Costs by Type

Different types of insurance will offer various protections, but they can also vary in price. Some insurance policies cover intellectual property or income, while others protect your physical assets or provide coverage for physical injuries. Here are some common categories of small business insurance:

  • General Liability: General liability covers the business in liability situations of property damage, bodily injury, defamation, or libel and typically costs around $40 a month.
  • Professional Liability: Professional liability, also called errors and omissions insurance, covers your business if your company makes a mistake or has oversights. This costs about $60 per month.
  • Business Owner’s Policy: A BOP, which usually includes property and liability policies with optional add-ons, will cost about $50 to $100 per month.
  • Workers’ Compensation: This policy will cover your employees’ medical costs and lost work wages for work-related injuries or illnesses. Workers’ compensation costs about $50 per month but might be more expensive depending on location.
  • Data Breach Insurance: Data breach insurance or cyber liability insurance will offer coverage for expenses relating to data breaches and cyber-attacks. This important policy is about $100 to $150 a month.
  • Commercial Auto Insurance: If your business has company cars for employees to drive, you have to have the vehicles insured. Commercial auto insurance costs about $150 per month but will vary by location.

Examples of Small Business Insurance Costs

Business insurance is important. For example, you might pay $50 or more per month for workers’ compensation, but the average claim for workers’ compensation can be around $40,000.

The yearly investment of $600 may save you thousands if someone is hurt on the clock. Injuries like burns — common for restaurants — can cost nearly $60,000 in claims, which are covered by workers’ compensation policies.

Commercial auto insurance is another crucial policy for companies with vehicles that employees use to perform work. Many work injuries are from motor vehicle crashes with average claims of around $80,000.

Then, consider data breach insurance. You may think you could skip this added cost, but this policy can save you considerable time and money. For example, a hacker might take down your entire tech stack, leaving you unable to operate.

If your business is the victim of a ransomware attack, hackers could hold your website or records hostage until you pay thousands of dollars. Not to mention that a data breach may cost a business over $200 per stolen record.

Small Business Insurance Costs by State

Businesses in highly populated areas or places prone to natural disasters will likely pay more for policies compared to more rural locations with fewer occurrences of flooding, hurricanes, or wildfires. Here are some average costs for general liability business insurance based on location.

  • California: $55 per month
  • Colorado: $53 per month
  • Florida: $58 per month
  • Georgia: $69 per month
  • Illinois: $46 per month
  • New York: $65 per month
  • Oregon: $48 per month
  • Pennsylvania: $60 per month
  • Texas: $59 per month
  • Virginia: $35 per month

Small Business Insurance Costs by Industry

High-risk businesses will have higher insurance costs. For example, a brick-and-mortar store or small construction company will have more risks than a sole proprietor who works as a freelance copywriter. Here are some average monthly premiums for a business owner policy in various industries.

  • Cosmetics and Salons: $550 per month
  • Pharmacy: $700 per month
  • Retail: $800 per month
  • Real Estate: $600 per month
  • Construction and Landscaping: $900 per month
  • Marketing: $300 per month
  • Freelance Writer: $130 per month
  • Restaurant: $1,000 per month

Protect Your Business With Small Business Insurance

You’ve worked hard to grow your business, but even one small disaster could cost you thousands and derail your progress. In severe situations, a major accident or lawsuit could even cost you your business.

Although business insurance is an added expense, it’s an important investment to protect your work, employees, customers, property, and income. No matter your industry, investing in small business insurance is in your best interest.

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