How much does Business Insurance cost?
The question “how much does business insurance cost” is often typed into Google Search by small or startup business owners searching for first-time insurance as well as established businesses looking to compare their business insurance costs.
What those business owners looking for business insurance will find is a variety of websites, mostly by big-name providers giving average monthly costs for business owners insurance, business auto insurance, workers compensation, and other forms of business insurance. These sites proudly say something like, these averages come from thousands of quotes or policies our company has issued over the past year.
But, are those estimates of business insurance costs accurate? Are they a good guide for a startup to help determine their budget? Are they useful for the established business to compare or estimate against what they are paying now?
The answer is simply no. No, no, no.
These estimates are absolutely not useful in either the case of the startup or the established business looking to compare rates or establish their costs.
Why? Because there are so many factors that affect the cost of insurance, and here are a few:
- Industry – a carpenter is certainly going to pay way more than a law office for business insurance, especially when it comes to the general liability and worker’s compensation policies.
- Geography – certain areas of the country have higher rates, especially for general liability than others. This is especially true for contractors in more urban areas than rural areas.
- Size – this is a no-brainer. A company with 3 employees regardless of industry is going to pay way less for business insurance than a company with 30 employees. Yet, the websites with averages make no distinction around this.
- Loss history – if you’ve been in business for several years and have had claims, you’ll pay more than the average or way more than a firm in a similar industry, size, and geography with no claims. It only stands to reason that a safer company with fewer claims will cost the insurance company less money over time, so they get lower rates and a less safe company will cost their insurer more and will pay more premium.
In fact, a startup with no loss history may pay more than an established firm with good loss history.
Even if you average all types of industries into one grouping it really isn’t representative of what an individual business will pay.
Look at this another way, if a carpenter wants to compare what they pay compared to an average found on many of these websites, their first impression is that they are way overpaying – maybe even in multiples. But in reality, they may have a competitive premium because the averages don’t address the high-risk nature of carpentry.
The inverse is also true. Let’s say someone is starting up a home improvement business and they are creating a proforma budget and use the averages found on a website and estimate that their monthly insurance cost is going to be around $130.
Then they actually get their quotes and find out that the real cost is closer to $1,300 a month or ten times the estimate– now what do they do? The whole budget planning process is blown up by using less than stellar information.
So, what’s the solution to finding out how does much business insurance cost?
Whether you’re a start-up or an established business, my advice is to talk to a professional insurance broker that focuses on business insurance. Discuss your needs and listen to their advice on what they think you may need. Most importantly work with someone you can trust and who knows what they’re talking about.
Another point I’ll add here is that whether you’re an established business or a startup I’d really discourage you from getting quotes online without human intervention. This is a recipe for disaster. Even the best quoting engines with A.I. can’t ask you the probing questions to uncover an issue or exposure that needs to be discussed and explored to make sure you’re protected.
Of course, I’d hope that if you’re looking for business insurance, you’d give me a call, and there’s some contact info coming up, but if you like to work with someone local to you, that’s great. Look for an independent agent or broker who works with many insurers versus what we call a captive agent who only works for one insurance company so you can have some choices and options to look at.
Here’s the bottom line.
In my experience speaking with an expert in the field of business insurance will not only help you find out what business insurance costs, but they will be able to give you guidance on what you need, and how much you need. In the long run, this will save you time and money. Two precious resources I’m sure you don’t have enough of.
Thanks for watching this video or reading this post, my name is Gordon Coyle and if you’re looking for help on business insurance costs or have a business insurance question, give me a call, let’s chat. No pressure, no sales gimmicks just some conversation to see if I can help you and if we might be a good fit for your business insurance needs. I work in all 50 states and love solving insurance and risk problems and issues for business owners. To get started, just click the button below! Thanks