How Much Is Small Business Insurance & Where Do You Buy It?

It takes a lot of hard work and sacrifice to build a business. Maintaining the operation is what separates the good small business owners from the great ones. A large part of that is making sure your business is protected from potential risks like lawsuits, accidents, and natural disasters.



Small business insurance is the solution that helps your business stay running. It gives you a peace of mind so that you can dedicate meaningful energy to the things that matter: your customers and employees. In this article, we discuss what small business insurance is, the different types of insurance, and where you can buy it.

Small Business Insurance

What is Small Business Insurance?

Small business insurance exists to protect your company’s operations, employees, and property. You invested much time, resources, and energy to get your business running. However, unforeseen circumstances can quickly eat into your budget and profits. Small business insurance is necessary because of a variety of reasons:

  • It is legally required
  • Your business could get sued
  • Insurance makes your business look trustworthy and credible
  • Small business insurance will keep your business operating
  • Provides protection to your employees
  • Covers costs related to acts of God
  • Some business contracts will require you to have it
  • It helps you gain and retain quality employees
  • It safeguards your human capital

How Much is Small Business Insurance?

You might wonder “how much does small business insurance cost?” it will depend on the size, number of employees, nature, and geographical location of your business. Businesses with physical products and sensitive data might have different costs than one without these components. According to an Insureon analysis, here is a quick breakdown of the different median premium cost and average insurance costs per month:

  • General Liability: $42 per month (median cost), $65 per month (average)
  • Business owner’s policy (BOP): $53 per month (median cost), $99 per month (average)
  • Professional liability (E&O): $59 per month (median cost), $97 per month (average)
  • Workers’ compensation: $47 per month (median cost), $111 per month (average)
  • Commercial umbrella insurance: $75 per month (median cost), $129 per month (average)

How Much is Small Business Insurance

How Much Insurance Should a Small Business Carry?

Every successful business will go through its ups and downs. If it exists long enough, it is bound to face risks, hazards, and issues. So, what is the best insurance for any small business to carry. To protect your company properly, it is important to invest in general liability insurance, product liability insurance, disability professional liability insurance, and E&O insurance.

There are also other insurance policies to carry depending on the nature of the company:

  • Workers’ compensation insurance – for businesses with at least one extra employee
  • Cyber liability insurance – for businesses that hold a lot of customer information or sensitive data
  • Commercial property insurance – for businesses that have a physical building or rely on high-value assets to complete work
  • Key person insurance – for businesses with an influential figure within the company

What Types of Small Business Insurance are There?

There are many types of insurance policies that roll up into small business. As a business owner, it is critical to understand what each one is, what it covers, and its value to your business. Different types of companies require different kinds of insurance, and the list below gives you a good idea of what you will need.

General Liability Insurance

General liability insurance covers claims related to property damage or injuries stemming from services, product, or normal business operations. It could also be used if you or your business is legally liable for issues or damage to the landlord’s building or property. This insurance will not cover automobile accidents, workmanship, employee injuries, professional mishaps, intentional acts, or punitive damages.

Professional Liability Insurance

Professional liability insurance offers coverage for you or your business against negligence claims from customers or clients. These claims could involve anything including personal injury, negligence, copyright infringement, and more. Professional liability policies protect you from damages involving thing you did incorrectly or actions that you should have taken.

Workers’ Compensation Insurance

Workers compensation insurance provides production for you, your employees, and business against illnesses, accidents, perils, and death. Almost every state requires that companies have insurance policies in place to cover lost wages and medical costs for team members who are sick or become injured on the job. Employees usually receive a percentage of their wages during the time they must miss.

Commercial Property Insurance

Commercial property insurance protects your company’s real estate and everything within. If a part of your property is damaged, destroyed, or lost, this insurance will assist with the repairs or replacement required.

Commercial property insurance is not just for your physical building. It includes your assets, which are critical in running your business. Having a commercial insurance policy will make it affordable to make repairs on important equipment after an unforeseen tragedy like a burglary, fire, or storm.

Cyber Liability Insurance

Cyber liability insurance protects your business from the expenses associated with a software attack data breach, or other cyber invasion. These costs could include anything like notifying customers, legal fees, fines, penalties, and credit monitoring activities.

If your company relies on large amounts of data and sensitive customer information, cyber liability insurance is a good idea. Businesses that have cloud data and organize credit card numbers are also at risk for cyberattacks, which is why cyber liability insurance are helpful.

Errors and Omissions Insurance (E&O)

Errors and omissions insurance (E&O) protects your company from lawsuits claiming you made errors or mistakes in your services. The insurance provides financial assistance for settlements or court costs, which will add up quickly.

What types of errors does this insurance cover? This insurance will typically protect your company from claims involving:

  • Misrepresentation
  • Errors in service
  • Negligence
  • Incorrect advice
  • Fair dealing or good faith violations

E&O insurance is critical because attorney fees, court costs, administrative costs, and associates fines could potentially put your company out of business. The insurance will successfully cover the claims if:

  • The reported incident happened on or after a retroactive date
  • The claim is filed during the extended reporting period or policy period

Unemployment Insurance

In most states, employees pay unemployment insurance on behalf of their team members. However, employees also pay this tax in some tax. This tax program is federally regulated and mandated, while the amounts and eligibility are assessed at a state level. The goal is to assist former employees in making ends meet in the event of losing their job.

Disability Insurance

Disability insurance supplements income if an employee or business owner cannot work due to a bodily injury or accident suffered away from the workplace. This insurance could also apply to an injury or illness that someone suffers from working for a longer, extended period. The purpose is to fulfill the lost income during the time the person cannot work.

Product Liability Insurance

Product liability insurance covers expenses if someone makes a claim that a product you distributed, manufactured, or sold caused property damage or injury. There is always a chance that your product could harm someone, and this could lead to settlement, judgement. Any person can sue over property damage or personal injury from your product, even if they did not use or buy it.

Product liability insurance can protect a variety of stakeholders who have inventory, including:

  • Wholesalers
  • Retailers
  • Tradesmen
  • Manufacturers

Key Person Insurance

Key person insurance is a life insurance policy that delivers a death benefit to a company if its leader, owner, or critical internal stakeholder dies. This unique type of insurance makes sense for businesses in the following situations:

  • The company’s reputation, bottom line, and financial health are attached to the person’s name, unique capabilities, and reputation
  • The employee’s death could harm the company financially

How to Save Money with a Business Owners Policy (BOP)

A business owners policy, also referred to as BOP, helps a company cover the three critical factors of value, convenience, and insurance coverage. It enables a company to bundle commercial property insurance, business interruption insurance, and general liability insurance into a single insurance policy.

As a result, the company can pay an individual premium, save money in the long term, and secure the needed coverage. While this is an excellent option for a small business, it may not be the best option for a company that does not need all the insurance options in the bundle. When you consolidate these insurance packages, you could save around 20% on premiums if you selected them separately.

Are You Legally Required to Carry Small Business Insurance?

Most states will legally require small businesses with employees to have worker’s comp insurance. Depending on the state, other policies will be needed too. Here is a breakdown of when your small business might be legally required to carry it:

  • Workers’ compensation insurance if your company has a team of employees
  • Professional liability insurance if your company offers professional services
  • Liquor liability insurance if your business sells or distributes alcohol
  • Commercial auto insurance if your business has a company vehicle

Where Do You Buy Small Business Insurance?

Here is a quick breakdown of the best places to buy small business insurance. Depending on your needs, explore business insurance quotes for each one of these small business insurance companies.

  • Hiscox – best option for independent contractors or freelancers
  • Liberty Mutual – best option for a business owners insurance policy
  • Progressive – best option for commercial automobile insurance
  • State farm – best option for overall insurance
  • Nationwide – best option for general liability insurance
  • The Hartford – best option for workers’ compensation insurance
  • Travelers – best option for commercial property insurance

Author

  • 8eeb4f65f2a1b2b993afe8c0d0585123?s=80&d=mm&r=g

    Chris is a busy mom of two, who loves to tinker with computers and read in her free time. Her knowledge of what it takes to start up a business especially businesses that operate on the internet has helped many people from around the world. Chris often shares her experience as an online entrepreneur and business coach, speaking at events all over about how she created multiple successful businesses and profitable websites. She also offers advice on how people can build their own business website or blog for very little money, while still maintaining quality content.

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