Average cost of business insurance

We're breaking down the ins and outs of business insurance pricing from how premiums are determined to the average cost by policy type.

cost calculations for business insurance
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If you’re currently in the market for a small business insurance plan, your first question is probably, “what will it cost?” The answer depends on your premium, however, most insurance premiums are different for each type of business. We’re breaking down the ins and outs of business insurance pricing to help you know what to expect and choose the best liability policy to protect your business. Let’s get started.

What impacts your business insurance premium?

Before we can dive into cost comparisons, it’s critical that you understand how insurers analyze you and determine a price, your premium.

Factors that influence the price of your business insurance premium include:

Your industry and type of business – Your entire risk profile is built around the type of work you do and its level of inherent risk. If you work in a hazardous field, your premiums will likely be higher.

Your policy limit – Pretty simple: if you get more coverage, it’ll cost more. It’s important to understand the cost difference in the policy limits; in some cases it can be relatively small.

The number of staff you employ – More employees means more risk.

The number of independent contractors you have on payroll – Similarly, more workers equals higher liabilities all around.

Your location – Rates differ based on geography. A business in a massive city like Los Angeles encounters far more risk than a small shop in Solvang, a town with 5,000 residents.

The state you operate in – Also, different states have different laws and requirements, especially for the types of business and their insurance policies. Certain states tend to give larger sums for damages, so if you’re in a “lawsuit friendly” state, you’ll pay for that benefit.

Average cost of business insurance

As mentioned, it’s quite tricky to discuss average pricing on a wide scale due to the various factors that impact any pricing model. That said, it becomes clearer when you continue to break it down into subcategories or smaller examples. For the purpose of today, let’s consider insuring your average small business owner.

Their profile would look as follows:

  • The business has been operating for five years or less
  • The have an annual revenue ranging from less than $50,000 to more than $200,000
  • They employ 1-5 full-time employees

What would the average cost of business insurance be? Again, it’s helpful to dive deeper by separating the insurances into their subtypes.

General liability insurance costs

A general liability insurance policy is a must-have for any small business. This type of policy shields the company and owner from liability associated with damages to third parties. In the case of a lawsuit, a general liability policy will typically cover:

  • Property damage
  • Body injury
  • Medical bills

The median yearly cost of a general liability insurance policy for a small business is $500 per year. This translates to a $41.67 monthly premium payment. But that’s the median figure. To help illustrate the point more clearly, we’ll look at average prices based on examples of different industries:

  • Photography – $275
  • Videography – $275
  • IT – $340
  • Finance – $350
  • Real Estate – $390
  • Building Design – $465
  • Food and Beverage – $500
  • Cleaning services – $530
  • Construction and Contracting – $825

On average, roughly 50% of small businesses pay between $300-$600 a year, with the other quarter percentages rounding out the low and high end premiums.

Professional liability insurance costs

Professional liability insurance, also known as an errors and omissions policy (E&O), is intended to protect professionals and consultants that give advice or provide professional services as a career. It’s meant to protect them from claims of negligence or inadequate work, which resulted in financial harm to the offended party.

Like general liability insurance, the pricing of an E&O policy ranges significantly.

Business insurance: Ways to save

Even if you’re on the low end of premiums because your business has less inherent risk, chances are you’re still paying too much for your insurance policy. This is because you’re paying for a policy that you might not be fully utilizing or you’re paying for insurance 24/7 but you only need it sometimes.

But what does that mean?

Well, you have a blanket, yearlong business insurance policy, right? If so, you’re covered Monday through Friday and Saturday and Sunday. You’re paying when you work and when you’re off the clock. Further, there may be weekdays when you don’t need insurance either, when you’re not dealing with clients or out at a job site. On all those off days, you’re wasting money.

Meet Thimble.

Thimble’s on-demand insurance coverage has revolutionized how small businesses get insured. With a Thimble General Liability Insurance and Professional Liability Insurance policy, small business owners never overpay. Thimble gives you the power to take out a policy by the hour, day, or month. This way, you pay when you need coverage, and save when you don’t. Thimble offers coverage with a limit of $1,000,000 or $2,000,000 starting at just $5.

At Thimble, we understand that, as a small business, you may need insurance on a moment’s notice. That’s why we designed it to evaluate that long list of risk factors and get anyone a business insurance policy in less than 60 seconds. Then, you (and your clients) get your Certificate of Insurance instantly. It’s just that easy. It’s Thimble—insurance that works when you do.

As a small business owner or freelancer worker you’re balancing client demands, finding new work, and your business expenses. Business insurance is a must-have and helps protect your business so that you’re protected against whatever life throws your way, so you can keep climbing and keep building. Take Thimble with you every step of the way.

Source:

Our editorial content is intended for informational purposes only and is not written by a licensed insurance agent. Terms and conditions for rate and coverage may vary by class of business and state.

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