How much does small business insurance cost?

Your policy's limits are the maximum amounts of coverage it can provide, usually $250,000 to $2 million or more. If you want a policy that covers more expensive insurance claims, expect to pay more than you would for basic coverage.

General liability insurance is an occurrence-based policy. It pays for losses that occur during the policy period and has two limits:

• Per-occurrence limit. The insurer will pay up to this amount to cover claims related to a single incident.
• Aggregate limit. During the lifetime of the policy (usually one year), the insurer will pay up to this amount to cover claims.

Most Insureon customers choose a general liability insurance policy with a $1 million per-occurrence limit and a $2 million aggregate limit, which costs an average of $42 per month. The average premium increases to $46 per month for customers who choose a policy with $2 million per-occurrence / $4 million aggregate limits.

Professional liability or errors and omissions insurance (E&O) policies are claims-made and only cover claims filed while your insurance is kept active. If you want the ability to file a claim after the policy expires, you can buy tail coverage for an additional cost.

The right amount of insurance coverage depends on your business needs. You want coverage that'll cover a potential lawsuit, without buying more than you need. Chat with a licensed insurance agent if you're unsure which limits are right for your business.

When deciding how much to charge for a policy, your industry is a top consideration for insurance companies. Insurers take into account any risks that might increase the chance of expensive or frequent claims, such as hazardous machinery that could injure workers, or a specific profession that often incurs malpractice lawsuits.

Here are several examples of businesses in high-risk industries:

• Businesses that engage with the public pay more for general liability insurance, which covers third-party bodily injuries and property damage. That means general liability insurance costs are higher for retailers, but lower for consultants who work on their own.
• Commercial auto insurance costs depend on the type of driving you do. Trucking businesses can expect to pay more for this coverage, as opposed to small businesses that own a company car.
• The professional services or advice you provide determines the cost of professional liability insurance. If similar businesses have a history of claims, that means increased costs for your business too.
• Healthcare and finance businesses that store medical records, credit card numbers, or other personal information can expect higher premiums for cyber insurance, which covers costs in the event of a data breach or cyberattack.
• IT consultants and tech companies often pay more for a specialized form of cyber insurance, technology E&O, to protect against data breach lawsuits.
• Retailers, restaurants, and others that depend on a physical location to conduct business face bigger losses in the event of a forced closure from a fire or storm, which is why they can expect higher premiums for business interruption insurance.

You might also run into insurance requirements for your industry. For example, construction businesses and installation contractors are often required to carry general liability insurance.

Your location can influence the cost of business insurance in several ways.

For example, businesses in an area with high crime or increased foot traffic may pay more for insurance that covers theft or customer accidents. Those in districts with expensive real estate can expect higher rates, as property damage claims will likely be higher.

Your state also affects when you need insurance and how much it will cost:

• Most states mandate workers' comp insurance for businesses that have employees. Premiums are often higher in states that pay more for healthcare.
• Almost every state requires commercial auto insurance for vehicles that are owned by a business. Your premium will partly depend on the cost of medical care, car repairs, and litigation in your area.

Finally, you may need a certain policy to work in a particular location. For example, businesses in real estate, insurance, or healthcare may need professional liability insurance (also called errors and omissions insurance) in order to get licensed in their state or work in a specific setting like a hospital.

Insurance companies use a system of class codes for reference when determining the premiums for some policies. These codes group similar types of work together to give the insurer an idea of the level of risk your business faces.

• General liability class codes group businesses by their industry. Construction businesses face higher risks of injuries and property damage claims. Professional services and consultants are considered less risky for general liability claims, and have different class codes to represent this.
• Workers' compensation class codes sort employees by the type of work they do. Clerical office workers across different industries may share the same workers' comp code, which designates them as low risk for work-related injuries and illnesses.

The premiums of policies that cover property damage and theft primarily depend on the value of the insured property and its condition, such as inventory, equipment, and your building if you own it.

There are two different ways to insure your property:

• An actual cash value policy reimburses you for the item's current market value, which includes depreciation for how long it was used.
• A replacement value policy will pay for the full cost of a brand-new replacement item.

Insuring your business property for its replacement value costs more, but it'll also pay out more in the event of a claim.

Your business operations and their associated risks will also impact your premiums. That includes the processes, systems, and activities that are part of your day-to-day work.

Streamlining your business operations can improve your efficiency and reduce your risks, which can help keep your premium low.

Here are a few examples of potential improvements:

• A tree trimming business conducts a hazard assessment before starting any project.
• A clothing factory implements a strict protocol for the use of dangerous machinery.
• A software development company has a strict code review process.

Your insurance company may have a list of best practices and protective measures that you can implement to reduce your premiums. That might include cybersecurity controls, or security cameras and alarms. In some cases, loss control measures may be required in order to get insured.

A history of claims will drive up your insurance rates, which is why risk management is essential. Even a single claim on your policy can result in a premium increase.

On the other hand, once you've been in business for several years and maintained a clean history of claims, you may see a decrease in your insurance rates.

Fortunately, there's a way to reduce the likelihood of a claim for every insurance policy. For general liability insurance, that might mean eliminating clutter that customers could trip over, or installing brighter lighting in a dim stairwell.

Similarly, security systems, sprinklers, and fire extinguishers can help prevent a property insurance claim like a burglary or a kitchen fire.

Business insurance companies sell a variety of products at different rates, which is why it's important to compare their offerings. You could contact each individually—but it's faster and easier to rely on an insurance agent or broker, like Insureon.

Here's a breakdown of the best ways to save money on business insurance:

• Compare quotes. With Insureon, you can fill out our easy application to get quotes from top-rated insurance companies. A licensed insurance agent will help you find coverage that matches your risks, at a price you can afford.
• Customize your policies. You can opt for a higher deductible or lower coverage limits to save money on your premiums.
• Pay the annual premium. Insurance companies often offer a discount when you pay the full yearly amount instead of the monthly premium.
• Manage your risks. Installing a security system, providing equipment like goggles and gloves, and eliminating clutter can reduce your risk of accidents and lawsuits.
• Bundle policies. You can often bundle policies bought together from the same insurer at a discount.

A business owner's policy is the most common cost-saving insurance bundle, but there are others as well:

• Professionals in some industries can buy general liability and professional liability insurance together.
• Tech companies often bundle errors and omissions and cyber insurance in a package called tech E&O.
• Designed for small and medium businesses with higher risks, a commercial package policy (CPP) bundles general liability and commercial property insurance.
• Management liability insurance bundles policies that protect a business's decision makers, such as directors and officers insurance (D&O) and employment practices liability insurance (EPLI).