Business Insurance Costs
What a business insurance policy costs depends on the types and limits of coverage you choose, plus factors related to the specific characteristics of the business you’re insuring. These can include things like its size; location; industry; physical, financial and intellectual assets; whether you have employees and if so, how many.
One of the most significant factors determining the cost of your business insurance premium is the number and types of coverages you choose. A business insurance policy can include a variety of different coverages such as general liability, property, auto, workers compensation, directors and officers, data breach and more. Generally, the cost of your business insurance premium rises as you add more coverages and increase coverage limits.
The typical risk factors that your business faces will also affect the cost of your business policy. Generally, the riskier your business or the industry you operate in, the higher the cost of insurance. Number of employees and business location are also a factor. In general, more employees cost more money to insure. A business located in an area that regularly experiences severe weather or with a higher than usual crime rate may also be more expensive to cover.
Other factors that can affect the cost of business insurance premiums include coverage limits, deductibles and payment schedules. Higher coverage limits and lower deductibles typically cost more. Also, a month-to-month payment schedule is usually more expensive than paying annually.
How Much Does General Liability Insurance Cost?
General Liability Insurance costs are largely determined by the type of work your business does, its location, and the number of employees you have. Usually, the more employees, more dangerous the type of work performed, and the less safe the work location – either due weather conditions, geography, crime rates, or other local factors – the higher your general liability insurance premium.
General Liability Insurance helps protect a business from certain liability claims. These can include property damage, bodily injury and personal and advertising injuries. As an example, imagine a landscaping business is doing work on a customer’s property. One of the landscapers accidentally backs a truck up and knocks over a tree on the customer’s property. When the customer makes a claim, General Liability Insurance can help cover the costs related to the claim.
How Much Does Professional Liability Insurance Cost?
Professional Liability Insurance costs are typically a factor of your company’s number of employees and their employment status, as well as your business’s potential for severe losses. More employees cost more to insure, and full-time employees cost more to insure than part-timers. When it comes to severity potential, businesses that offer more costly services or that deal with more expensive assets, typically pay more for professional liability insurance.
Professional Liability coverage, also called errors and omissions insurance or E&O, helps protect your business from the costs of claims that errors were committed in the products or services provided by your company.
For example, a contracting company is hired to redo a restaurant’s kitchen. After completing the job, the restaurant owner files a claim because the contracting company didn’t install a cooktop in the right location. Professional Liability Insurance can help cover the cost of the claim made against the contracting company.
How Much Does Commercial Umbrella Insurance Cost?
The costs of Commercial Umbrella Insurance are usually determined by the total amount of coverage bought under the policy, your business’s credit history and its public visibility. Commercial Umbrella policies can cover a business for up to several million dollars. The higher the policy’s coverage, the more it will cost. Typically, the better the business’s credit, the lower their cost for Commercial Umbrella Insurance. High visibility businesses can have a higher frequency of liability claims made against them. Because of this, they may pay more for their Commercial Umbrella Insurance.
Commercial Umbrella Insurance extends a business’s liability coverage. For example, imagine a printing business has a Professional Liability policy with a coverage limit of $250,000. That printing business makes a mistake in their services and their client makes a claim against them for $300,000. If the client is awarded the full amount of the claim, Commercial Umbrella Insurance can help cover the amount that exceeds the $250,000 limit of their Professional Liability Policy.
How Much Does Workers’ Compensation Insurance Cost?
The cost of Workers’ Compensation premiums can be calculated per $100 of annual payroll, based on a simple formula: Classification Code Rate X Experience Modification X Payroll (per $100) = Premium. (This is a simplified calculation for reference purposes only and actual premium calculations can be more complex.) The classification code is assigned based on the hazards and exposures of the work. The experience modification is based your business’s claim history. This calculation can give you a general idea. Rates can vary by state, industry and claims history.
Workers’ Compensation Insurance is required by most states. It provides benefits to employees for work-related injuries or illnesses. These benefits include coverage for medical costs, wages lost from time off of work and more. As an example, if an employee of a manufacturing company injures his back while loading pallets onto a truck, Workers’ Compensation can help cover wages the employee loses while recovering. It can also help cover costs of his physical therapy and more.
How Much Does Commercial Property Insurance Cost?
The cost of Commercial Property Insurance is usually determined by the location and age of your business’s premises and the value of your business’s assets. Businesses located in areas that experience flooding, hurricanes or other natural disasters will most likely have to pay more for Business Property Insurance. If a business owns high-value assets such as equipment, machinery or inventory, its Business Property Insurance may cost more than a business that has less. Businesses located in older buildings or ones that are more easily damaged and need repairs, may cost more to insure as well.
Commercial Property Insurance helps protect the building a business owns or leases. It also helps cover business property such as tools, equipment, inventory and furniture. For example, if a real estate business has an office location that is damaged in a storm, Commercial Property Insurance can help cover the cost of the damage.
Businesses that purchase the right insurance, invest in their future. It’s important to remember that insurance claims can easily exceed hundreds of thousands to millions of dollars. If the cost of the claim exceeds the business’s insurance policy limits, it could lead to financial ruin. Without the appropriate insurance coverage, a business owner may have to pay the costs of weather damage, data security breaches, theft, fire or more out of their own pocket.
Business Insurance Almost Every Company Needs
- General Liability Insurance
- Commercial Property Insurance
- Commercial Auto Insurance
- Workers’ Compensation Insurance
- Directors and Officers Insurance
- Data Breach Coverage
Top 6 Tips to Save Money On Business Insurance Costs
Bundling Coverage – BOP
One of the most popular ways to save money on business insurance is by bundling coverages. A Business Owners Policy (BOP) is an easy way to do this. A BOP combines Business Property and Business Liability Insurance in one policy. Insurance companies sometimes offer discounts to business owners who bundle their coverages. Not only can this help businesses save money, but it is also more convenient. Instead of having to manage two policies and two payment schedules, businesses only have to manage one.
Review Coverages Annually
It’s also important that businesses review their coverages annually. As technology and industry trends change, so do risks. 10 years ago, data breach coverage was almost nonexistent. Today, 20% of cyber-attacks target businesses with less than 250 employees. 60% of those companies that are attacked close within six months because they didn’t have coverage. Reviewing coverages every year can shed light on new industry risks that businesses are not covered for. It can also help businesses find areas where they could reduce or eliminate coverage that is no longer needed or where they may take advantage of new offerings and opportunities to save.
Lower Risk Exposure
The Hartford’s Risk Engineering can help lower a business’s risk exposure. Our risk engineering experts can help evaluate a business’s workplace procedures and help train employees to become safer. This includes tips on ergonomics, emergency response plans and safety evaluations. All of this helps contribute to lowering a business’s risk exposure, creating a more efficient workplace and reducing costs.
Businesses can also cut the cost of their insurance by modifying their deductibles. Opting for a higher deductible can often lower an insurance premium. If a business decides to do this, it’s important to make sure that the deductible is set to an amount that the business can afford to pay. An insurance agent can help determine what the right level for a deductible is.
Paying Premiums Annually
Paying premiums monthly may feel like a cost-saving option. There’s less commitment to a large sum of money upfront. This might be a more convenient option for new businesses that are just getting a handle on their books and cash flow. But usually lump annual payments are less costly than the sum of monthly payments. Businesses can often save a significant amount of their yearly insurance cost by paying premiums annually.
Improve Security Protocols and Procedures
Adding fire safety, cyber security and workers’ safety programs can be a smart and effective way to help reduce your annual insurance costs. Though it may require some resources at the beginning to document policies and procedures and train your people, you’ll likely find that it’s worth it. The emotional toll on those affected and the financial fallout from a work accident will almost always cost more than the investment you make in preventative planning and training measures.
For example, training employees on how to probably use a fire extinguisher and handle small fires is a low-cost, or possibly even free, service you can get from the fire department. This training could mean the difference between a small fire in the break room that destroys a microwave, and a fire that destroys the entire building.
Improved security protocols and procedures can also help make your business more efficient. By addressing employee safety and ergonomics you can reduce employee absences due to illness and injuries. Ultimately, this can lead to an increase in productivity. Protecting your business with the right insurance coverages can also help you save money.
As little as 1 inch of floodwater in a 1,000-square-foot property can cause more than $10,000 in damage. Commercial Flood Insurance can help cover the costs of that kind of damage. Without Commercial Flood, a business may have to pay for the damage out-of-pocket. A cost like this could threaten a business’s survival.
The world of cyber threats is no less menacing to businesses than are natural disasters. In 2016, 55% of businesses surveyed claimed they experienced a data breach1. The average cost of data breach is around $4 million. By adding Data Breach Coverage to a business insurance policy, businesses can help reduce the chances of becoming another statistic. Data Breach Insurance from The Hartford provides access to data security training, breach mitigation, and coverage to help handle the costs associated with managing a data breach.
Businesses are more at risk for liability claims now than ever before. On average, liability claims have increased by 8.7% every year since 1950. That means more and more businesses are being sued. Adding General and Professional Liability Insurance, and Commercial Umbrella, can help protect a business from the potentially devastating costs of claims and lawsuits brought against their company.
1 2016 State of Cybersecurity in Small & Medium-Sized Businesses (SMB)