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How Much Does Business Insurance Cost?

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Congratulations! Your business is growing. Your hard work and dedication are paying off. Your vision is coming to fruition.

While a growing business is a wonderful thing, it can also come with its share of unexpected issues. Naturally, an expanding enterprise requires more working capital, employees, and equipment. As a result, your commercial business insurance requirements will also change.

Your flourishing endeavor now will have different insurance needs. Therefore, we will discuss the question, how much does business insurance cost? Moreover, we will discuss how your premiums will change as your coverages change along with your business.

Required Commercial Business Insurance

Small companies need commercial business insurance. There is no question about that. For most companies, General Liability Insurance (GLI) provides sufficient coverage. GLI covers a company’s third-party liability. For instance, GLI protects shops if a customer suffers an accident on its premises.

Individual professionals such as doctors, lawyers, accountants, or contractors need Professional Liability Insurance (PLI). PLI covers professionals’ responsibilities stemming from their professional activities.

Also, commercial auto insurance is a must when small companies use vehicles for business purposes such as delivery or staff transport. Commercial auto insurance can save businesses from costly traffic accidents.

Business insurance costs are relatively affordable for more businesses. A standard GLI policy costs about $300 a year for a $250,000 policy. However, your premiums might be higher depending on your business’ size and risk level.

A PLI policy can cost less than $50 a month for about $250,000 in coverage. Naturally, this cost can increase based on the risk level associated with the profession. For instance, doctors and lawyers may have a higher premium than a plumber or auto mechanic.

As for commercial auto insurance, a small business can expect to pay between $900 and $1,200 a year for roughly $250,000 in coverage. Nevertheless, commercial auto premiums may go up depending on the number and type of vehicles.

Commercial Business Insurance Coverage Changes for Growing Businesses

A growing business leads to changes in insurance coverages. Mainly, coverage limits should increase as the company expands. Additionally, companies may need to consider additional coverages as it continues to grow. However, the question remains, how much does business insurance cost?

Firstly, let’s consider expanding current coverage.

Most GLI policies cost about $300 a year for about $250,000 in coverage. However, your business may have a larger sales area or perhaps have opened other locations. Therefore, you may need to increase your policy coverage to $500,000 or even $1 million.

Expanded GLI coverage may run up to $600 a year. Naturally, this premium may increase specifically if the business’s risk also increases. For instance, a contractor that takes on larger projects would logically represent greater risk.

Also, PLI coverages may need to increase. Generally speaking, PLI coverages increase in $250,000 to $1 million increments. For example, a doctor with a growing private practice may need to purchase more coverage. PLI policies in $1 million chunks can cost around $100 to $200 a month.

Commercial auto insurance would most likely need to increase as the business expands. Your business would need to purchase more coverage as it adds more vehicles and drivers. Consequently, you may find your company paying upwards of $1,200 a year.

On the whole, a small business may initially pay around $25 to $30 a month for GLI coverage. However, changing requirements may lead the company to pay more than $50. Additionally, commercial auto and PLI may significantly drive up insurance premiums.

Purchasing Additional Commercial Business Insurance Coverages

In addition to GLI, PLI, and commercial auto, you may need to add other coverages to protect your business. These coverages also represent an increase in your monthly insurance premiums. Nevertheless, they may be necessary for your peace of mind.

Let’s take a look at these additional coverages:

Workers’ Compensation

Every state requires some workers’ compensation coverage. Please remember that states generally mandate workers’ compensation coverage for businesses with three or more employees.

Your business needs workers’ compensation since GLI will not cover any accidents or injuries your employees suffer. For example, GLI covers a customer that falls in your store. However, GLI does not cover an employee that sustains an injury in your store.

Insurers calculate workers’ compensation premiums based on your company’s payroll. The rate is 1% to 2% of your total payroll. For example, a $1,000 monthly payroll would pay between $10 and $20 a month.

However, your business won’t need to pay workers’ compensation if it hires contractors instead of employees. Contractors must have personal insurance coverage. Consequently, your company isn’t liable for any injuries they sustain.

A common question pertains to remote workers. Specifically, does your business need to pay workers’ compensation coverage if it employs remote workers?

The short answer is yes.

For instance, if an employee working at home suffers back pain from sitting at their desk for too long, they could file a workers’ compensation claim. Without workers’ compensation coverage, your business would have to pay for the employee’s treatment.

Also, workers’ compensation may apply to delivery drivers. If a driver suffers injuries in an accident, they could file a workers’ compensation claim. Therefore, it is wise to list them on your policy.

Business Owner’s Policy

As mentioned, GLI covers third-party liability. However, GLI does not cover damage to your business’s property. For example, GLI does not cover the cost to replace stolen or damaged tools. Therefore, your company needs additional coverage to protect your tools and equipment.

A Business Owner’s Policy or BOP covers your business’s tools, equipment, and buildings. This coverage is highly useful, particularly when your company invests inexpensive assets. Moreover, BOP covers you in case of natural disasters such as floods, hurricanes, or earthquakes.

Some business owners like to bundle their GLI with BOP. For instance, they include third-party liability protection (GLI) in their BOP policy. Consequently, there are two coverages in a single policy. This approach is useful as it can help you save money.

Many factors influence the cost of a BOP. Most businesses can expect to pay about $500 annually. Nonetheless, some BOP coverages can easily surpass $2,000 a year.

Specifically, your BOP’s coverage limit determines your premium. Consequently, policies covering costly equipment will come with a higher premium.

Please keep in mind that BOPs come with a deductible. A deductible is an amount you must pay upfront every time you use your policy. As such, policies with a higher deductible come with a lower monthly premium. In contrast, a lower deductible means a higher monthly payment.

Commercial Renter’s Insurance

Rapidly expanding businesses often need to rent an office, production, or warehousing space. As a result, commercial renter’s insurance may become a significant priority.

Commercial renter’s insurance covers your business from paying for damage to the rental property. For instance, a renter’s insurance covers damages to the rental property stemming from a fire or flood. Without this coverage, your business would need to foot the bill for their repairs.

Additionally, most landlords require a renter’s insurance before or at the signing of the lease contract. Therefore, you may have no choice but to get coverage.

On the whole, commercial renter’s insurance can cost between $250 and $450 a year. However, you can save by including commercial renter’s insurance into a BOP. Of course, a separate policy might be a good idea if you plan for a short-term rental or lease.

Commercial Umbrella Insurance

Your expanding business may need additional insurance coverages in case of a rainy day. Rainy days are what commercial umbrella insurance covers. Commercial umbrella insurance is a type of coverage that serves as additional coverage in case of unexpected events.

Consider this situation:

A delivery van gets into a serious accident. The damages exceed your commercial auto policy’s coverage limits. As a result, your business would have to pay for the difference out of pocket.

However, your business has a commercial umbrella policy. As such, you won’t have to pay for anything out of pocket. Your commercial umbrella policy will cover the difference.

Some business owners may feel that a commercial umbrella policy is an unnecessary expense. However, a commercial umbrella policy doesn’t become useful until you truly need it. Consequently, it’s better to have it, just in case.

Commercial umbrella insurance generally starts at around $200 annually for a $250,000 coverage limit. However, larger coverage limits such as $1 million cost around $1,500 a year.

You can always bundle commercial umbrella insurance with GLI or BOP to save on your premiums. Nevertheless, some business owners opt to get their commercial insurance policy with a separate insurer. After all, it never hurts to shop around for a better deal.

Cybersecurity Insurance

Nowadays, virtually every aspect of business happens online. Even if your company has physical locations, much of the administrative work happens on electronic devices. Consequently, your business may be vulnerable to cyberattacks.

Cybersecurity insurance is a relatively new product designed to protect your business from intrusions. For example, doctors manage highly confidential electronic patient records. As such, an information breach could prove costly.

Please bear in mind that information breaches can cost tens of thousands of dollars to repair. Also, legal fees stemming from lawsuits can seriously affect your company’s finances. Consequently, cybersecurity insurance is worth considering as your business expands.

Cybersecurity coverage typically starts at approximately $650 a year. This coverage assists your business with repairing information breaches or hacks and covering legal fees if any.

How You Can Save on Insurance Premiums as Your Business Expands

As your business grows, you may feel burdened by the thought of increasing insurance premiums. Indeed, paying more for your insurance can affect your company’s bottom line. Therefore, it’s worth looking into the ways you can save money on your premiums.

Bundling Policies

The more straightforward way to save money on premiums is by bundling various policies. Please keep in mind that your insurer will be willing to work with you to find the best deal for your business.

When looking to bundle, look for insurance carriers that offer multiple types of coverages. Smaller carriers may offer lower premiums, but they may not provide every type of coverage you need. As a result, you may need to shop around for additional coverages.

A common practice is to add multiple coverages to your GLI. Additional coverages may include workers’ compensation, BOP, and commercial auto insurance.

Another approach is, to begin with, a BOP and includes additional coverages such as third-party liability (GLI), commercial auto, and workers’ compensation.

Shop Around

It never hurts to shop around. Looking around to see what other insurers offer is a good way of finding great deals. Specifically, take advantage of competing for insurance carriers’ offers to switch. You may get discounts on comparable coverages.

Also, check out specialized insurance carriers. For example, some insurers specialize in commercial auto or cybersecurity. These insurers can provide you with comprehensive coverage at a reasonable premium. 

Leverage Policy Renewals

Policy renewable time is always a great opportunity to renegotiate your premiums or add new coverages. You can ask your insurer to review your premiums, especially if you have a clean record. For instance, you can renegotiate your commercial auto premiums and deductibles, particularly if your drivers have clean records.

Additionally, adding new coverage to your existing policy, such as workers’ compensation to a GLI policy, can be a great way to lump your premiums into a monthly payment. Your insurer stands to benefit by giving you a break. So, don’t be afraid to have this conversation.

Conclusion

Expanding businesses need to pay close attention to their insurance premiums. After all, a larger company means greater risk. Therefore, business owners must be mindful of the need to increase their existing coverage.

Additionally, business owners should consider adding more coverages for compliance and practical reasons. Ultimately, greater coverage needs mean higher monthly insurance payments. Nevertheless, business owners can find ways to save on their monthly premiums.

You can work with your insurer to find a better deal for your insurance needs. Mainly, bundling coverages can help you save on your monthly payments. However, check out the competition. They might offer a better deal on individual policies.

Lastly, leveraging policy renewals can be a great way to reduce your insurance bill. If your insurer wants to keep your business, they will be willing to work out a deal for you!

Main Takeaways     

  • Expanding businesses also have growing insurance needs. Some needs are due to compliance issues such as worker’s compensation. Other needs may be stem from requirements such as renter’s insurance when leasing a property. These needs often exceed the coverage in a standard General Liability Insurance policy.

  • Growing companies also invest invaluable assets. Consequently, purchasing a Business Owners’ Policy may be necessary. Also, adding commercial vehicles will require getting commercial auto insurance. Commercial auto coverage is a legal requirement and a good way to protect both cars and drivers.

  • Commercial umbrella insurance provides helpful coverage in case of unexpected situations. As a result, business owners should consider this coverage for a rainy day. Car accidents and data breaches can become quite costly to address.

  • Business owners should work with their insurance carriers to get the best possible deal. Your insurer can help you by offering a discount on bundle coverages. Also, take advantage of policy renewals. You can always renegotiate your premiums, especially if you purchase additional coverages. 
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