Cost of Business Insurance

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The Cost of Insurance

For existing business owners and future ones, investing in insurance that fits your specific needs can feel daunting at first. Several different factors can impact the costs associated with insurance, such as what type of industry your business operates in and how much revenue you generate in a given year. While the cost can vary depending on your circumstances, insurance provides all business owners with peace of mind in knowing that they are financially protected.

What Factors Have the Highest Impact on Cost?

Among the many factors that can influence the cost of insurance, a few will likely have the largest impact. These include:

  • The type(s) of insurance your company needs
  • The industry your company operates in
  • The size of your business (typically based on revenue, the amount your business owns in assets and your total number of employees)
  • Your specific company’s risk profile (such as years in business and claims history)

Insurance Types

The actual type of insurance you’re hoping to buy will often have the largest influence on total cost. This is partially because some types of insurance are simply more expensive than others. Another thing that will affect cost is the number of policies you need to buy to cover your business fully. If you need several types of coverage to protect your company and its assets adequately, multiple lines of insurance will also increase the total cost.

For a small business owner, you may feel inclined to reduce the cost of your insurance. While it makes sense to confirm that you’re not paying for unnecessary coverage, reducing your coverage can mean that you’re opening yourself up to significantly higher risks down the line. The short-term tradeoff is not worth being put out of business.

Industry

The industry your business operates in will impact the cost of your insurance because it in part determines which sorts of coverage you need (and how much), but also influences your risk profile. For example, if you are starting a tour bus company, you will need insurance that covers your busses. By contrast, someone opening a salon will need insurance that covers the equipment of hairstylists among other things. In both of these scenarios, the different industries will require you to invest in insurance that covers property up to a certain value. A fleet of tour buses and hairstylist equipment will each have different associated costs.

For each value, business owners will pay a premium. This is a small percentage of the total amount insured. Not only will a bus fleet have a higher value than hairstylist equipment but the business owner will need more than just property insurance. Busses additionally need to purchase auto insurance policies that provide liability coverage for drivers in case of an accident. Having several different protections will change the total cost of insurance.

Your Company’s Size and Risk Profile

The total cost of insurance can also vary significantly depending on the particular circumstances of a given business. The scale of a business will impact annual revenue and the total number of employees on the payroll. A locally-owned and operated supermarket that employs over a dozen people will have a higher payroll than a small, father-and-son plumbing company. The amount of revenue will also differ significantly between these two businesses. Additionally, a business in an expensive location like New York City will cost more to run than one in Boise, Idaho.

Your claim history will also be a determinant for business owners. Those who have had one or more claims filed against them will pose a greater risk for insurance companies and will be required to pay a higher premium than other businesses with no claims history.

A newer business will also likely pay a higher premium than one that has operated for several years. This is because an established business poses less risk if they have a history with few or no claims.

Getting a Quote

Before attempting to purchase an insurance policy, it’s beneficial for any business to research how much that insurance may cost. The best way to do so is to get quotes from multiple insurers and compare prices. This can take a long time to complete by yourself, but by working with a broker or agency, such as CoverWallet, you can provide all the information necessary once, and the broker will compare quotes for you.

Estimates can vary significantly from the real quote, so to get an accurate idea of the price you will be asked for specific information about your company to determine rates and eligibility.

In most cases, you’ll be asked to provide a detailed history of your business earnings and losses, management information (such as who you employ and how many years of experience exist you and your managers have), the amount of assets your company owns (including properties), details about your specific industry, and tax filing information (Social Security and Federal Tax ID numbers).

Still not sure what you need?

Head on over to CoverWallet’s Insurance Checklist. There you’ll find a list of insurance types needed for your industry.

Each Business is Unique

When you understand all of the different factors that go into insurance pricing, it becomes clear how the associated costs can and will vary significantly from business to business. The unique profile of a given business will be taken into account in the quoting process and a comprehensive and custom plan will be created just for you.