Exposure to risks and potential for losses affects every business organization. Business insurance protects your company from specific perils and adverse events, whether your business is negligent or if an accident or other misfortune befalls it. You may wonder, how much does commercial insurance cost?
Unfortunately, there is no standard answer to that question, as many different factors apply to insurance premium rating calculations. These factors are different for every business. Comparing your company's insurance cost to the average can be misleading, as the comparison doesn't take into account the unique risks and coverage needs of your business.
However, according to a report by the National Association of Insurance Commissioners (NAIC), the median cost of general liability insurance for small businesses with less than $1 million in revenue was $500 per year. Remember that this is just for general liability coverage and does not consider other types of insurance that a business may need, such as professional liability insurance, commercial property insurance, workers' compensation insurance, or cyber liability insurance.
The following premiums are the median and average costs for business insurance for low-risk industries. The median price represents a middle price meaning half of the median prices will be lower, and half will be a higher dollar amount.
|
Policy Type |
Median cost |
Average cost |
|
General liability |
$42/month |
$65/month |
|
Business owner's policy (BOP) |
$53/month |
$99/month |
|
Professional liability (E&O) |
$59/month |
$97/month |
|
Workers' compensation |
$47/month |
$111/month |
|
Commercial umbrella |
$75/month |
$129/month |
The cost of business insurance can vary depending on the type of coverage you need, the size of your business, and the industry you operate in. These rating factors will differ from one insurance company to another but usually include the following:
Also, Check: How much does business insurance cost in Alabama?
Not all business industries carry the same type and level of risk. For example, carpenters and tree trimmers are high-risk companies for workers' compensation coverage. The employees' work in these fields involves using power tools at job sites, increasing the potential for employee injuries. These factors elevate the risks involved.
A home-based advisor doesn't have these dangers, and the workers' compensation rate will not have contemplated any high-risk factors into their rates for home-based advisors. Will they pay less? Yes, for workers' compensation, but when it comes to professional liability coverage, the home-based consultant will need this coverage while a carpenter may not.
A business with a higher payroll will pay a higher premium for workers' compensation and, in some cases, general liability insurance, too, compared to one-employee companies. When a coverage type's premium is based on payroll, a rate per $100 of payroll is charged for the premium. These organizations' risk of loss for that line of coverage increases when employee payroll increases. With worker's compensation, it is easy to see the correlation between payroll, premium, and exposure to injuries.
Another rating basis used to calculate premiums is annual revenue, which should make sense. The more revenue, the more exposure there is to loss. The more business you do, the more likely something will go wrong, resulting in a third-party claim from your product or service. Revenue is the exposure used to rate retail stores, manufacturers, and contractors.
Your premium will depend on the coverage you choose. For example, with general liability coverage, a policy with a $1 million per occurrence limit and a $2 million aggregate will cost more than a $1 million policy with a $1 million aggregate. Coverage options also generate premiums; your final quote will include these charges.
Besides industry, payroll, and revenue, other variables that will affect your business insurance costs are:
Many issues could affect your company's operational success and should be considered when insuring your business. When seeking assistance, remember to speak with an insurance agent who has invested time working with businesses to get the best insurance options.
The most cost-efficient way to save money on your business insurance is to reduce your company's losses. Insurance providers reward businesses with discounts for a history of consistent management, but having prior claims leads to increased premiums.
By taking these steps, you may often qualify for discounts on your business insurance.
Are there other methods of saving? Sometimes you can bundle policies for a lower price. The most common bundle is a business owner's policy, which includes general liability and commercial property insurance.