Starting a small business can be a thrilling experience but it’s not without risks.
A business insurance policy can protect you against some of those risks.
Paying for various types of business insurance is one measure to safeguard your business, your employees, and your financial future.
Depending on the nature and size of your business, you may be legally obliged to purchase some kinds of insurance. However, different types of insurance will be suitable for some businesses and not others.
Therefore, costs will vary from business to business.
What is Small Business Insurance?
Small business insurance involves paying monthly fees to help protect the business you have worked hard to build. In return, you partially protect your business from a range of potential mishaps.
Types of Business Insurance
How much you pay per month will depend on what level of coverage you need. The most common types of business insurance will protect some of the following:
- Your assets (equipment, business premises, stock)
- Your income/earnings, in case of business interruption, for example
- Customers
- Employees
- Business owners
Public liability insurance
Public liability insurance can help cover the costs if someone sues you for any damages or injuries they sustain as a result of your business operations. This would protect you, for instance, if a client were to trip and fall on your premises.
Workers compensation insurance
If you have any employees, you must have workers compensation insurance. This protects workers in the event of an accident, illness, or death related to workplace activities.
Professional liability insurance
Also called errors and omissions (E&O) insurance, professional liability insurance covers your business against work performance claims, including errors, omissions, and negligence.
Product liability insurance
If you are involved in the production or sale of products to the public, then you should get product liability insurance. It protects you against loss or damage claims made against you for issues related to products you sold or supplied. This is often included in any public liability coverage.
Management liability
Aimed specifically at managers and directors, this insurance can cover you for claims made against you for risks associated with managing a company.
Cyber liability insurance
Since many small businesses rely on technology to operate, cyber liability is increasingly important. It provides cover for damages related to cyber attacks.
Commercial property insurance
This type of insurance covers your business against damages to your commercial building. This could be due to fires, natural disasters, or theft, among other things. Commercial property insurance could be especially crucial if your business relies on expensive equipment or supplies.
Commercial vehicle insurance
You need to insure any commercial vehicles that you use as part of your business. This protects you against property damage either done by your vehicle or to it. Costs can vary depending on what you do with your vehicle.
How Much Does Business Insurance Cost?
Insurance rates vary from business to business and generally involve a combination of insurance options.
Most insurance providers offer flexibility and combination packages tailored to your business’ needs.
These business insurance packages neatly offer comprehensive insurance coverage in one payment.
If you own a small business, you can start with a general liability policy for around $65 per month that will offer basic coverage.
However, some small businesses may need specialised coverage that can exceed $1,000 per month.
The cost of your small business insurance can be affected by your company’s:
- Size
- Claims history
- Industry risk
- Location
As you scale your business, expect to pay more for insurance. With a bigger business, with more products/employees/assets, there are more possibilities for things to go wrong. Insurance payments will reflect this.
Your monthly rates may be higher if an insurance company sees that you have made many claims in the past, leading them to see you as high risk.
Your location can affect your insurance rates as different localities across Australia might have different rules for compliance. Other location factors can affect insurance rates. For example, if your business is in a place where natural disasters are common, this would increase commercial property insurance rates.
Business insurance for certain industries like construction can cost a lot more due to the expensive equipment involved. Workplaces with a high risk of injury will pay more in workers compensation rates. A florist would need to pay commercial vehicle insurance to cover the delivery van but wouldn’t have cause to buy professional liability insurance.
With so many factors affecting the cost of small business insurance, it’s important to do the following:
- Know your business needs. Assess your business risks to gauge what you should cover while also researching local laws to ensure you are legally compliant.
- Shop around and get multiple quotes to compare coverage options.
- Look for packages, often called business owner’s policies (BOPs), that bundle together insurances in a convenient package.
Manage Costs With QuickBooks
At QuickBooks, we want to help you start and grow businesses.
Our small business blog is home to lots of helpful advice advising small business owners on everything from managing business loans to getting grants.
We know that managing finances can be a challenge, especially when starting out, and factoring in business insurance costs is another expense to manage.
With our insights and reports, it’s never been easier to manage cash flow with sophisticated forecasting helping you plan ahead.
Take a look at our free trial to explore how we can help manage your finances and prepare you for growth.
FAQs
Do I need small business insurance?
Depending on your business, you may be required by law to purchase some types of insurance. It’s also recommended because it helps cover the costs of property damage and liability claims, which could otherwise bankrupt your business.
Do self-employed people need business insurance?
If you accept payments for goods or services, then you’re a business. It doesn’t matter if you’re doing this on your own as a sole proprietor or as part of a team. As a business owner, it’s advisable to get some form of business insurance.
Is business insurance a start-up cost?
Yes, business insurance costs should be factored in right at the start as part of your business operations.
