a pile of various US currency in bill form

A Breakdown of the Costs of Commercial Insurance

Are you thinking of buying commercial insurance for your business?

Before you do, you should have an idea of what you’ll be spending and where your money will be going. Below, we’ve got a guide on the breakdown of the costs of commercial insurance.

In the US, there are over 30.7 million small businesses, and they make up 99.9% of all businesses. While many small businesses thrive and grow over the years, that isn’t the case for all. Others can operate correctly, but accidents, disasters, and other incidents end up affecting the business.

Therefore, it’s good to have small business insurance. However, you don’t want to buy any old commercial insurance without knowing what you’re paying for. Keep reading to read the breakdown of the typical commercial insurance.

What’s In a Commercial Insurance Plan?

Before we get to the breakdown, let’s first discuss the coverage you can expect in a business insurance plan. Most insurance plans cover the typical risks that a business faces. Those risks include:

  • Data breaches
  • Property damage
  • Lawsuits
  • Vehicle protection
  • Reputational damage
  • Business interruption
  • Environmental and pollution liability losses
  • Liability for injuries or damage, and
  • Workers’ compensation claims

Let’s start with worker’s compensation insurance. In most states, this is a mandatory step to opening and operating a business.

This coverage pays for any medical care for employees who become injured at work. It will also replace partial wages of employees injured at work. If an employee dies because of injuries from work, it compensates the employee’s family.

One more type of commercial insurance is property insurance. It ensures your property in case of disasters, fires, or theft occurs.

It often covers furniture, technology, inventory, and all other things used for business. You can even include personal property if it’s in the building when the disaster occurred.

Commercial auto insurance is a typical pick for companies that use a vehicle for work. It covers the employee driving the vehicles in case of accidents up to the policy’s limit. Commercial insurance may also include terrorism insurance, key employee insurance, and umbrella policies.

What Are the Factors that Affect the Cost of Commercial Insurance Plans?

Other than your coverage needs, many other things make your insurance plan cost more or less. Some factors are things you can’t control. Those factors include the risks that your business faces.

For example, you have a business in construction. There are a lot of safety risks in construction, especially to the workers and passers-by. Make sure your employees and all who enter the site follow strict safety procedures.

The daily tasks and work involved can also affect the cost of your commercial insurance plan. Do your employees have a lot of extra time to check their emails? Or are they busy and occupied the moment they time in for work?

Here is a list of other factors that can influence the cost of your commercial insurance plans:

  • Business classification (sole proprietorship, corporation, or other)
  • Goods or services of your business
  • Salary totals
  • Employee numbers or operation size
  • The business’ gear and their values
  • Sales reports
  • Location of the business

Insurance companies will likely include inquiries about these things when they interview you. They will also check all these things as they calculate the cost of your insurance plan.

Why Do Commercial Insurance Costs Vary?

You pay more for your commercial insurance if there are higher risks involved. Such risk factors cover not only physical risks to the employees and customers. You also have to consider the financial risks involved in the business.

Risk is one key factor that can increase or decrease the cost of your commercial insurance plan. The location is another thing that you want to look at. Businesses in populated areas face higher commercial insurance costs.

The reason is that cities or areas with large populations have a higher likelihood of crime. Some areas face only the risk of vandalism. The state where you open your business may ask for certain requirements, which can affect the total cost of your insurance.

You can also say the same for businesses that have more public visibility. People are more likely to target popular businesses rather than lesser-known ones. Expect to pay more for insurance as your business’ reputation grows.

The coverage that you take for the business will also affect the insurance cost. If you add more coverage to your policy, you’ll pay more for the insurance plan. If you want to lower your premiums, pick higher deductibles for your insurance.

How Much Does Commercial Insurance Cost?

The commercial insurance pricing will depend on the business risks involved. To help you get an idea of the true cost of commercial insurance, here are some examples.

Five hundred dollars per year is the smallest that a business owner may pay for commercial insurance. The average business pays under $1000 per year for insurance, while the average cost of insurance for most businesses is $740.

You may have a small business in the IT industry, in which you have a remote home office. Expect that amount for coverage on data breach and professional liability insurances. If you have employees, you must pay the workers’ compensation insurance, too.

A plumbing company with 20-30 employees may pay $3000 to $5000 per year. The money will go to cover the equipment needed and the risks involved.

The best way to learn how much your commercial insurance plan costs is to talk to the insurance company. You can also ask for the breakdown of costs if you’re paying for multiple coverages.

Get the Right Commercial Insurance Plan for Your Business Today

We hope you learned something useful in our guide on the cost of commercial insurance. Now, you know why the cost of commercial insurance is different for every business or company. You also know why you need to buy insurance for your business.

Do you want to learn more about commercial insurance and how it works? Are you looking for the right insurance company to ensure your small business?

Contact us today and tell us more about your business. We’ll help you get the proper coverage for your business insurance needs.