Starting a business comes with a certain amount of risk. As a business owner, you already have the desire and ambition to take on new challenges, but you’ll also need to protect the value of the assets you purchase for your firm, and this is where small business insurance cost becomes important.
Insurance is a major reason why many businesses fail, and that has been proven. It is always a rather sad story to find out that a business failed because the founder could not find out about a small business insurance cost quick enough to save the business.
Even while you’re busy taking care of clients or meeting with investors, you need to make sure your small business is appropriately safeguarded in order to run smoothly and effectively.
Safeguarding the business can come in different forms and requirements, and it’s a small business insurance cost in this case.
Every year, several businesses fail due to unforeseen catastrophes such as fires, labor strikes, the loss of vital stock in transit, the loss of a key employee, and other dangers.
Insuring a small business is one of the most secure ways to protect it!
This article focus on laying out all the facts about small business insurance, the basics, the costs, and every other important detail.
Table of contents
- What Is Small Business Insurance?
- What Are The Benefits Of Small Business Insurance?
- Types of small business insurance
- How Much Does It Cost For Small Business Insurance?
The first step in efficient risk management is to recognize the risks in all areas of your business—management, marketing, contracts, staff, and the specific consequences of your product or service on customers and the market.
Having enough of the correct kinds of insurance is one of the smartest moves any business owner can make.
Not only does insurance protect your company’s assets from hazards that could wipe them out in the event of a disaster, but it also protects your personal assets, which are frequently at risk from a liability standpoint.
As a business, before you tackle anything complicated, start with something like a general liability coverage that protects a company from accidents and injuries that may occur on its property, as well as exposures related to its products.
Consider the case of a visiting salesperson who breaks her ankle after slipping on a banana peel during a tour of your office. Her lawsuit against you is covered by general responsibility.
Let’s imagine your company makes window sashes, and you have hundreds of thousands of them placed in people’s homes and businesses. If something goes wrong with them, general liability insurance will cover any claims for damage.
The catch is that the damage can’t be the result of shoddy work. This highlights one of the problems with general liability insurance: it often has a lot of exclusions.
Make sure you know what your insurance coverage covers and what it doesn’t. Additional liability policies may be necessary to address specific concerns.
What Is Small Business Insurance?
Small business insurance protects firms from disasters or losses that occur because of their usual operations, particularly when a reimbursement request is made. Expert indemnity insurance, public mortgage insurance, and employers’ liability insurance are among the options.
Small company insurance is designed to assist you in the event of unforeseen losses or damages. Some types of insurance are required by law, such as employers’ liability insurance if you hire anyone and motor insurance if you drive for work. Other requirements are determined by your company.
To take it a step further and provide context that may be missing, CNBC poses a question they feel every entrepreneur ought to consider: “What would happen if one or more of your important employees died unexpectedly or became unable to work due to a disability?”
The loss of a key employee — whether a founder or a top salesperson — may be deadly for many small firms. Enter key man insurance, a type of business-to-business insurance designed to help a company or nonprofit survive if a key employee dies or becomes disabled and is unable to work.
The proceeds of a policy can be used to pay off debts or cover overhead expenditures, for example.
It’s usually, but not always, the firm or nonprofit’s founder(s), especially in the early stages of growth, when start-ups rely significantly on one person’s specific expertise and/or abilities, or perhaps their ability to recruit talent and early clients.
What Are The Benefits Of Small Business Insurance?
#1 – Protects the business image
A business’ corporate image can be defined as the mental image that people have of the company, its goods, and its services. The performance, media coverage, and activities of a firm all contribute to its corporate image.
A company’s corporate image changes over time and can be altered by making the appropriate efforts in the proper direction.
The reputation of a firm in the marketplace, or how people perceive it outside the company, is referred to as its corporate image. The corporate image of your organization in the market has a significant impact on customer perceptions of your business.
Having a positive company image is advantageous since it increases the amount of money earned at the cash register. Furthermore, a positive image aids in the recruitment of shareholders, business partners, and customers.
Because of the advantages of having a positive corporate image, many businesses work tirelessly and put in additional efforts in addition to increasing sales to achieve it.
#2 – Helps to minimize financial losses
Business liability insurance is a basic form of liability insurance for any company, however, it does not cover financial losses. If a firm’s operations create mostly financial losses, the coverage provided by business liability insurance for damages that are specific to the company is quite restricted.
Financial loss cover, on the other hand, protects against merely financial losses and liabilities arising from a contract. Business liability insurance and financial loss coverage are sufficient insurance coverage when taken together.
In the event of a loss, insurance professionals will aid you by determining whether a responsibility exists and the extent of the harm. This frees up resources for your company’s core business, allowing you to focus on what matters most while professionals negotiate with the party seeking damages.
Your liability insurance will also cover the legal costs of the proceedings if the claim is disputed and taken to court.
Types of small business insurance
Different types of insurance provide different levels of protection, but they can also differ in cost. The following are some of the most frequent types of small business insurance:
#1 – General liability
General liability insurance normally costs roughly $40 per month and covers the firm in the event of property damage, physical injury, defamation, or libel.
This is what safeguards you if someone slips and falls in your office and sues you. Also, if a third party is injured as a result of normal company operations due to a freak event. I can’t think of a single company that wouldn’t benefit from this type of coverage.
#2 – Professional liability
Professional liability insurance, often known as errors and omissions insurance, protects your firm in the event of a mistake or oversight.
Some may disagree, but getting this insurance can be more expensive than it is worth in some cases. For example, many types of liability insurance in the medical industry can cost upwards of six figures per year in premiums.
This is where you must decide how much professional risk you are willing to take. This is mostly for service businesses; product businesses are generally unaffected. This will set you back roughly $60 per month.
#3 – Business owner’s policy
A BOP typically costs $50 to $100 per month and includes property and liability policies with optional add-ons.
This policy covers commercial property, including the office. You might not need this if you don’t lease a location but work out of a coworking space and store 99 percent of your business assets in the cloud (which is becoming more prevalent). However, most firms require this.
#4 – Workers’ compensation
Until the 1930s, if a person was harmed on the job, he or she would sue the company. This clogged up the US court system, so businesses banded together and used their weight to have worker’s compensation laws passed.
Essentially, this protects you if one of your employees is harmed on the job. As a result, if an employee is hurt on the job, they cannot sue you. Even if you only have one other full-time employee besides yourself, most states need this.
The only time you wouldn’t have to get this is if you were a one-person operation. This, like General Liability and Property Insurance, is quite inexpensive in terms of coverage, so there’s no reason to skimp on it.
For work-related injuries or illnesses, this coverage will cover your employees’ medical bills as well as lost pay. Workers’ compensation is roughly $50 per month, although it may be more depending on where you live.
#5 – Data breach insurance
Data breach insurance, often known as cyber liability insurance, covers costs associated with data breaches and cyber-attacks. This crucial information security protection costs around $100 to $150 each month.
#6 – Commercial auto insurance
If your company provides work cars for employees to drive, you must ensure the vehicles. Commercial auto insurance costs around $150 per month, although this varies depending on where you live.
How Much Does It Cost For Small Business Insurance?
It is critical to have business insurance. Workers’ compensation, for example, may cost $50 or more per month, while the typical claim for workers’ compensation is around $40,000.
If someone is injured on the job, the $600 investment might save you thousands of dollars. Burns, which are prevalent at restaurants, can result in claims totaling roughly $60,000, which are covered by workers’ compensation policies.
Another important product for businesses with automobiles that workers use for work is commercial auto insurance. Car accidents, which result in average claims of roughly $80,000 cause many work injuries.
Then there’s data breach insurance to think about. You may believe you can avoid this extra fee, but this policy can save you a lot of time and money. A hacker, for example, could knock down your entire tech stack, rendering you unable to function.
If your company is targeted by ransomware, hackers may hold your website or records hostage until you pay thousands of dollars. Not to mention the fact that a data breach may cost a company upwards of $200 per record stolen.
Insurance costs will be higher for high-risk organizations. A physical store or a small construction company, for example, will face greater risks than a sole proprietor who works as a freelance copywriter.
The following are some examples of average monthly premiums for a company owner policy across several industries.
- Salons and cosmetics: $550 per month
- $700 per month for pharmacy
- Monthly rental: $800
- $600 per month in real estate
- $900 per month for construction and landscaping
- $300 per month for marketing
- $130 per month as a freelance writer
- $1,000 per month for a restaurant
Aside from these 6, there are a few smaller, more sporadic insurances to consider, such as business interruption insurance, which protects you if your business is forced to close due to events beyond your control.
Also available is cyber insurance, which protects you from the consequences of being hacked.
When it comes to insurance, normally if at all possible, you should self-insure (that is, set up a rainy day fund to cover unexpected expenses).
Small business insurance is designed to protect you from catastrophic events that would put your business in jeopardy if they occurred.