You’ve made the leap and started your own small business! The possibilities are endless and, though you’re scared, you know deep down that success will be yours. But what happens if something goes wrong?

Many small business owners face insurmountable obstacles because they did not have small business insurance to protect them from costly lawsuits. In these cases, insurance is worth the cost.

Small business insurance covers those “whoops” events such as a display item falling on a customer, or a competitor claiming that you destroyed their reputation with a libel social media post. You can’t control what types of claims come, but you can control whether or not you protect your business with insurance.

Many people fear small business insurance costs, thinking that it will be out of their budget. The reality is that you can’t afford to work without insurance: The average slip-and-fall accident can cost $20,000.sup 1

How much does small business insurance cost?

Small business insurance costs will depend on the type of insurance that you need and get. Most businesses consider one or all of these three types of insurance policies:

General liability insurance: Protects you from third-party claims of property damage, bodily injury, and personal and advertising injury. General liability insurance provides the legal investigation and defense of claims as well as settlements or judgments up to the policy limits.

Professional liability insurance: Provides the defense and investigation of claims over mistakes made by your business operations that may have caused a financial loss for your clients. Professional liability insurance covers losses stemming from your failure to provide professional services properly. Also called errors & omissions (E&O) insurance, it is almost always sold along with general liability insurance.

Business equipment protection: Provides coverage for losses to your owned, rented, or borrowed business property and equipment that travels with you to and from jobs. Business equipment protection protects against theft or accidental damage. It is a type of inland marine coverage, which protects business equipment wherever it goes.

Many variables can affect the cost of your small business insurance, such as:

  • Your location
  • The total coverage limits selected
  • Industry
  • Revenues
  • Claims history
  • Policy duration (whether you purchase the policy for a short period or for the entire year)

For example, the average cost of a general liability insurance policy for cleaners is $47 per month. A short-term policy might cost about $9 per hour for the same coverage. A professional liability policy in a low-risk industry like dance instruction might cost only about $27 monthly.

The cost of business equipment protection coverage will vary depending on the value of the equipment that you are insuring. This can be as low as $6 per month for $1,000 in coverage.

How much does business insurance cost per year?

Usually, business owners buy coverage on an annual basis with a monthly premium so you’ll be protected whenever a job arises. However, paying for an annual insurance policy upfront is the most cost-effective way to buy insurance. It can also help you get more business because when people know that you’re an insured provider, they feel more confident in your professionalism.

Generally speaking, Thimble’s median customers:

  • Pay about $650 per year for general liability insurance.
  • Pay around $724 per year for professional liability insurance, which is almost always sold along with general liability insurance.
  • Business Equipment Protection varies by equipment value.

It’s best to get a quote for your business to see exactly what you’ll pay. Your business’ specific details affect your premium, which we’ll discuss later.

How much does small business insurance cost monthly?

If you need insurance more than a couple of weeks in the month, you’re most likely better off paying for a monthly policy. You’ll get the benefit of having coverage when you need it, and you won’t be scrambling to buy insurance when you need to focus on work.

Here are the median monthly costs of Thimble’s small business insurance coverages:

How much does on-demand small business insurance cost?

With Thimble, small business owners can buy on-demand insurance, meaning you don’t need to pay for coverage when you don’t need it. If you are taking on a job, you can get coverage by the hour, day or week.

This is invaluable to certain service providers. For example, a handyman does not have work for several weeks. When he gets a three-day job, he could get on-demand small business insurance for as little as $54 per day.

Here are the median costs of general liability insurance:

Let’s say that a professional takes on a week-long job. Here are the median costs of professional liability insurance:

What factors impact how much small business insurance costs?

Many factors play a role in determining the cost of your small business insurance. These factors include:

  • Industry: What you do involves certain risks. The riskier your occupation is, the higher your premium will be.
  • Location: Where your business operates will impact your premium. Two identical companies across town in different ZIP codes may not have the same premium.
  • Crew size: The bigger your crew, the more risk there is for something to go wrong. It just adds more people into the mix of probabilities. A larger crew size likely means higher premiums.
  • Coverage limits: Getting more coverage will increase your premiums. Don’t let that fool you: double the liability coverage doesn’t mean double the premium costs. Get a quote for both to make sure you are getting the protection you really need.
  • Coverage length: Generally, the longer you need coverage, the more you will pay. However, rates may be more favorable when you purchase a policy for a year rather than on an hourly basis.

What other types of insurance do you need?

While most businesses will need general liability insurance, professional liability insurance, and business equipment protection, there are other types of coverage that you may need or want.

  • Commercial property insurance covers your owned building that you operate your business out of as well as your contents within it (e.g., furniture, supplies, materials, and electronics). If you have a central location or hub that you own or rent, you may want to consider commercial property insurance. Even if you don’t own the building, you want to cover your property inside it.
  • A business owners policy (BOP) combines general liability insurance with commercial property insurance. It is often a cost-effective way to get both coverages in one convenient policy. Many BOPs also cover business interruption should you be unable to generate revenues as a result of an accident or need to temporarily relocate. Consider a BOP if you want to package general liability insurance with business property protection.
  • Workers’ compensation insurance pays for medical bills and lost wages of an employee who is injured while performing work duties or who falls ill as a result of employment. If you have employees, this is usually required by law.
  • If you own a vehicle in the name of your business, you will likely need a commercial auto insurance policy. Most states require a personal auto insurance policy to drive a vehicle; however, these usually won’t cover accidents that happen while performing business-related activities. If you have delivery or work vehicles, commercial auto insurance is something you can’t ignore.

Why small business insurance is worth the cost

We know you don’t want to add another expense to your business budget, but business insurance is well worth what you spend. Consider some of these common claims:

While the cost of insurance is something no one loves to pay, most small businesses don’t have the extra funds to deal with a loss in the thousands of dollars. Without small business insurance, you’d be at risk of needing a loan or closing your doors if you couldn’t afford the loss. Small business liability insurance provides your legal defense, investigation of the claims (even false ones) and covers valid claims for you so that you can continue to make money.

There’s no better time to get a quote to see just how affordable small business insurance is. Thimble has made the process super simple: Choose “Get a Quote” here or on our app. Click to purchase and get your policy and any necessary Certificates of Insurance immediately, and use our app to manage your policy from the palm of your hand.

Get prepared for just about anything

Be ready for the worst-case scenarios that life can throw at your business. That means being prepared for the little old lady who accidentally slips, falls, and breaks a hip (because they always seem to do that).

After all, people can sue you even if they don’t have solid ground, so get the insurance that defends you from potentially expensive claims.

Just one claim can harm you financially. Getting the right coverage at the right price will make sure that you have the right protection when a loss happens. Being prepared for the worst means your business can perform at its best.

Written on July 16, 2020 | Modified on: August 30, 2021

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.