It can happen to any small business owner — arriving to work only to find property damage, stolen equipment and months of work undone.
Nobody can predict when the unexpected will occur, but you can plan for it. Insurance coverage is important for every small business, even the teeny tiny ones. But, how much should your business insurance cost in the first place? And, is there anything you can do to cut that cost down?
How much does business insurance cost?
Business insurance reduces your financial liability for certain events like theft or accidents on your property, but it can cost you handsomely. Trusted Choice Insurance Agents reports that general liability insurance costs small businesses from $500 to $15,000 per year.
This is only one piece of the puzzle, however. Beyond a general liability policy to protect you in the event of a lawsuit, you’ll want property insurance to protect the building and the things inside. Property insurance is roughly $1,000 to $3,000 a year per million dollars of coverage amount.
If you’re a one-person show, then you could be okay with just the liability and property insurance. But businesses with employees are legally required to carry the following insurance:
- Worker’s compensation
- Unemployment insurance
- Disability insurance
Workers’ comp helps you cover an employee who suffers bodily injury, but will cost you anywhere from 1.4% to 2.9% of an employee’s total compensation. If you have a small number of employees, this can be very manageable.
The yearly insurance total can be anywhere from a few thousand to upwards of 20 thousand, depending on your property, the size of your business and the number of workers you have. Now, it’s time to see about lowering that amount.
How to reduce your business insurance cost
Reducing your business insurance cost is possible, but there are often trade offs. The following tips can help you lower your insurance costs, but make sure you speak with an insurance professional and possibly a business advisor before making your final decisions.
1. Raise your deductible
Just like health or auto insurance, a lower deductible means you’ll pay more for small business insurance premiums, but less in the event of needing that insurance. It’s a risk, but having a higher deductible will reduce your insurance premiums. Just make sure that the deductible is an amount that you’re willing — and able — to pay if the time ever comes.
For property insurance, run some numbers and see what you’d be saving each year in insurance rates by raising your deductible. Then, look at your inventory and see what kind of money it would take to replace most or all of what you have. If the money saved on insurance isn’t anywhere near enough to replace your potentially lost assets, this shift likely isn’t worth it.
2. Cut unnecessary coverage
At a bare minimum, it’s a good idea for most small businesses to carry general liability insurance. This blanket insurance policy protects you if any injuries or accidents happen in the course of business. It also protects you if a customer or client claims you were negligent.
For other insurance policies, though, ask yourself if you really need the coverage. Other options — like property insurance, professional liability insurance, umbrella insurance and product liability insurance — may not be necessary for your business. Review each individual policy’s coverage terms carefully and check for overlap or duplication of benefits with your existing insurance policies. If there’s overlap, you’re probably paying more than you need to for no real benefit.
If you operate a physical location, it’s a good idea to have some property insurance. This is also true if you run a business out of your home and have physical products on hand.
Theft or disaster can cost you in business property damage, which can set you back months, interrupt your business operations, or even cause you to close up shop. This doesn’t mean you can’t lower your coverage limit, but having some property insurance when you have products or a retail location is a great idea.
You know your specific business needs better than anyone, so think about which type of insurance really fits your business. When in doubt, ask an insurance agency or business advisor for assistance.
3. Look for package deals
If you do need multiple forms of coverage, consider a Business Owner Policy (BOP) rather than individual policies. As a BOP, this insurance packages liability and property insurance into one policy.
Bundled BOPs can be cheaper than buying the policies individually, and as an added bonus, BOPs usually contain business interruption insurance. This can reimburse you for lost revenue due to a property loss.
Speak to an insurance agent about your type of business, what kind of property you own, and your employee count to determine what kind of bundles are available. Often times, they can give you an insurance quote on the spot, making it easy to decide if the policy is too expensive or within budget.
4. Shop around
A licensed and reputable insurance broker can help you find the right business insurance policy. Be aware, though, that brokers receive commissions from sales, so they don’t always have an incentive to get you the best deal.
Entrepreneur.com recommends businesses get bids from at least three different brokers, independent agents, and direct agents to get the most competitive prices. You can also use a website like Insureon or netQuote to get online quotes from a variety of insurance providers. While shopping around, it’s a good idea to look at local insurance providers as well.
5. Reduce your risk
The higher risk your business is, the more your insurance company is going to charge you for coverage. Talk with your insurance company and ask what you can do to prevent losses.
Ways to reduce business risk include theft-prevention programs, disaster preparation measures, additional human resources training or workplace safety measures. Less risk means you’ll likely file fewer claims for lower amounts so your insurer may be willing to reduce your rates if you implement their recommendations.
6. Ask about discounts
It never hurts to ask your insurance provider about discounts available to your business. For certain trades, small business insurance costs can be reduced simply because of their group or organization. For example, grocery stores are able to get an organizational discount in many cases.
You may also be eligible for safety discounts, especially after following the previous step. If your company recently added any new security or underwent any special training, ask about safety discounts and get a new liability quote.
You’ll also want to see about getting a loyalty discount, especially if you’ve been with your provider for some time. Similarly, some providers will give you a discount for referring any other businesses or friends and family.
7. Pay in advance
Many insurance providers will offer discounts to those who pay in advance, especially when buying 3, 6 or 12 months of insurance at a time.
This can be a large lump sum in some cases, but the savings when broken down over the course of a year can be substantial. If you can’t afford this route right now, start setting aside some each month to try paying for next year’s insurance all at once.
Ultimately, business insurance is invaluable
Yes, business insurance can cost a lot. But, the cost of not having it can be even greater. You’ve worked so hard to get your business where it is. Protect it and everything inside, including you, with business insurance.
You can put a price on business insurance, but you can’t put a price on the feeling of security.