How Much Does a 1 Million Dollar Business Insurance Policy Cost?

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Figuring Out the Cost of Your Business Insurance Policy

As a business owner, you know that accidents will inevitably happen. General liability insurance helps keep you protected. No matter what industry you're in, you can customize your insurance to fit your needs and keep you, your business, and your customers protected.

What Does Your General Liability Insurance Cover?

Across several industries, general liability insurance is essential for businesses. Before we cover how much these policies cost, let's explore the coverage you'll be getting. General liability insurance covers:

  • Advertising and personal injury

  • Bodily injury

  • Property damage

Factors That Influence Your Insurance Policy Cost

Several factors decide most insurance policies, including business insurance premiums. Insurance companies want to know:

  • Where you live

  • Your work location

  • What industry you work in

  • The size of your business

  • History of your claims

  • Your deductible

  • Your insurance coverage limits

All these factors play a significant role that can affect the cost of your insurance premium, regardless of whether your business is valued at 1 million dollars or just 1 dollar!

On average, your business may pay between $300 and $1,000 annually for $1,000,000 of basic professional liability insurance. This price depends on the factors mentioned above. If you have a more significant business, expect to pay more for insurance due to the greater risks of having more products, clients, locations, etc.

Having a smaller company doesn't guarantee your rates will be lower. If you are a small business that offers physical activities, you could pay more in premiums to cover accidents.

Depending on the needs of your business, per policy, coverage limits and deductibles will vary. If you choose to pay a higher deductible, you'll save money for your business on monthly premiums. The downside to doing so means you'll pay more out of pocket when you file a claim.

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Why Do You Need a Business Insurance Policy?

Without business insurance, you're vulnerable to the cost of damages and accidents caused while doing business. These costs can leave you and your family in a financial crisis. General liability insurance helps you to generate more business.

Most people won't work with you unless they know you are insured. If any lawsuits occur, having business insurance gives you the comfort of knowing there are no out-of-pocket expenses to pay. If your business had any tools or equipment stolen, adding content coverage to your policy will cover those items.

Are you a manufacturer? General liability insurance covers you if you sell a defective product that causes damage or injury. Employees recognize that you are serious about conducting business with this coverage.

You'll be able to hire the best candidates in your industry. Having insurance for your business is more important than many people think.

Recap on What a Business Insurance Policy Covers

  • Property damage: If you cause unintentional damages on a client’s property general liability insurance covers it. If a customer does sue you for damages, your policy can cover those damages as well as the legal fees of your customer.

  • Third-party accidents: This insurance protects against claims of bodily injury, property damage, and accidents. You’re also covered if a third-party injury occurs on your property.

  • General liability protects your equipment and tools: If you have a commercial general liability insurance policy, adding contents coverage in some cases covers the cost of replacing or repairing tools and equipment that were lost or stolen.

  • Advertising or personal injury claims: This coverage protects against things like slander, which can be detrimental to a business, especially those just starting out.

  • Faulty products claims: If a customer finds that you have a faulty product, you're protected under general liability insurance. Faulty products are essentially products that don't work as advertised.

How Much Are Business Insurance Premiums?

When shopping around for insurance, the first question you always have is, “how much will it cost?” Predicting insurance premiums is difficult because many factors go into the cost. Some insurance companies have a free tool that allows you to estimate your cost.

4 big factors that go into determining your premium are:

  1. Your industry. Example: If your business transports hazardous waste material, your premium will be higher than that of a clothes retailer.

  2. Your loss history. Example: If your business has already made ten insurance claims in the past year, your premium will be higher compared to a business owner who has only made one claim during the same period.

  3. How many years you've been in business. Example: A young company is likely to face more risks compared to one with several years of experience.

  4. Location of your business. Example: A business based in urban land prone to bush fires will face a higher premium compared to one based in the city or an industrial park.

The different sources of information used to determine business insurance premiums are your payroll and your property values.

  • Your payroll calculates the premium for your workers’ compensation. Your payroll doesn't affect your commercial property premium at all.
  • Property values determine your property premium and have no bearing on the premium for your workers’ compensation.

How Much Insurance Do You Need for Your Business?

Before you start a business insurance policy, you need to know what the average cost of business insurance is. When determining how much insurance you need for your business, there are a few things you need to understand. First, you need to know your business.

There are bumps in the road that you won't be able to predict. However, you can assess how much insurance you may need. If you know your business and what factors influence your coverage, you’ve won half of the battle.

Before calculating how much insurance you want to buy, ask yourself these eight golden questions:

  1. Do I have a sole proprietorship?

  2. What type of business do I have?

  3. Where is my business housed?

  4. How big is my business?

  5. Are my employees highly experienced?

  6. Who are my customers?

  7. How many employees do I have?

  8. Where is my business located?

You need more coverage with the more risk you take on. Your insurance should grow and change with your business. To figure out which areas of your business might need more liability, monitor your business operations.

Once you figure out your risks, you'll have a better idea of what coverages you need to include in your insurance package.

There are endorsements you can add to your general liability insurance called add-on coverages. When you use these policy enhancements, they give your business protection against cyberattacks, fire damage, employment practices, liquor liability, and any other exposures you may have.

FAQs About a Business Insurance Policy

Here are some of the frequently asked questions we receive on the cost of a business insurance policy:

What happens if I don't have small business insurance?

Without insurance, don't expect to keep your business open for long. A major event can happen at any time that causes significant damages to your business. Without insurance, the cost can be devastating. Huge losses can put you out of business. Every expense would have to come out of your pocket.

How can I save money on small business insurance?

We know you don't want to spend money when you don't have to. If you're thinking about taking lower policy limits to control costs, remember whatever your insurance doesn’t cover is taken out of your pocket. When you exceed policy limits, things get costly.

If you're thinking about controlling costs by getting a higher deductible, remember that you have to pay before any benefits kick in.

How can I lower my liability insurance rates?

There are a couple of ways you can lower your liability insurance rate. You can choose a lower deductible to lighten the load of your monthly cash flow. You will have to pay more money out of pocket if you need to make a claim.

You can also package multiple insurance coverages together. If you take as many as you can from the same company, you may take advantage of huge discounts.

What type of business insurance do I need?

For the basics, every business needs general liability insurance and commercial property insurance. If you are a small business owner, you can combine these insurances into a Business Owners Policy or Commercial Package Policy. (If you want to know the difference, check this out). If you have employees, you will have to carry Workers’ Compensation Insurance. Not having this insurance can be a disadvantage to you.

Is there a comprehensive insurance policy that will cover all my risks?

A comprehensive policy capable of covering all the risks you could face would be pretty expensive. Most people wouldn't be able to afford it. In most cases, a comprehensive policy wouldn't be beneficial to you.

Final Thoughts About a Business Insurance Policy

Picking the right insurance for your business can be hard at times. Knowing that your business is covered helps you to rest better at night. Knowing which policy works best for your business and keeping the cost of your insurance as low as possible is the main priority. Protect yourself, your business, and your employees with general liability insurance.

Choosing not to get insurance for your business can cost you tons of money. That’s why it's best to sit down and speak with an agent to find out what you need and what you don't need. For more information, please contact us today at (646) 844-9933. You can also schedule a free consolation by filling out the form on our website.

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