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Cost of Business Insurance for Small Business Owners

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What is the cost of business insurance for small business owners? Is it a wise decision for small business owners to consider insuring their businesses? Well this article will tell us, so lets get started.

Most business owners might not like buying insurance because they feel the money can be saved to pay for other business expenses, payrolls, rent and business maintenance.

However, a business without insurance will suffer the cost of losses from her pocket and if care isn’t taken, when such business is hit by a major detrimental loss, they can be pushed out of market.

Firstly, starting up a business requires the mindset of an entrepreneur, it takes more than being an employee to do so.

Well, what happens if after you started the business, it got attacked by fire or any natural disaster, that means your business is gone even before you know it.

Hence, I encourage you to consider a business insurance in your business plan, if you don’t know what a business insurance means, keep reading this article as i unveil them to you.

Therefore, lets start by knowing what insurance is all about to give us a better picture of the meaning of business insurance.

What is insurance?

Insurance is a means of protecting businesses, properties and any thing of value to man from financial losses that may come in uncertain ways.

It can be a good hedge to secure businesses from bankruptcy when an unforeseen loss occurs. It is usually a form of financial loss recovery.

It’s an arrangement by which a company undertakes to provide guarantees of compensation for specific losses, damages, illness, or death in return for payment of a specified insurance premium as described by Oxford dictionary.

According to Wikipedia, Insurance is a means of protection from financial loss, it is a risk management control used as a hedge against financial losses in general.

Hence, Business insurance is the amount of money a business pays to an insurance company in a bid to protect her from unforeseen financial losses.

Also read this: 14 Reasons You Need a Business Partnership Agreement

9 Factors that determines the cost of business insurance

Here are 9 vital keys that determines the cost of business insurance policy for business owners. Insurance companies consider these factors when calculating your insurance policy premium.

  1. The type of business industry you belong to. For instance, petrochemical and fire activity companies pay higher insurance premium than water companies.
  2. The financial loss records of the business. That is to say, businesses with high record of financial losses tend to pay more insurance fee.
  3. Number of employees in a business: A business with more employees and workers would likely pay more insurance cost than a lesser employee management.
  4. The total number of machinery a business operates with on a daily basis.
  5. Businesses where harmful chemicals are produced tends to pay attention to insurance than others.
  6. Experience level of business owners: Business owners with good track record and expertise pay less insurance cost when compared to newbies.
  7. The more coverage you buy, the more you pay and vise versa.
  8. The location of your business. Real estate buildings in severe weather geographical areas pay more than those in less harsh regions.
  9. Total financial size of business, a billion dollar business will likely pay more insurance than a million dollar business.

Also read this: How to Boost Workplace Productivity in 35 Ways.

Cost of business insurance today:

In simple terms, the cost of business insurance is the total amount of money a person pays to secure his business from detrimental financial loses which might come in unexpected ways.

A research from states the following median and average cost of business insurance for various business owners.

  1. General liability pay a median cost of $42/month and an average cost of $65/month.
  2. Business owners policy (B.O.P) pay a median cost of $53/month and an average cost of $99/month.
  3. Professional Liability pay a median cost of $59/month and an average cost of $97/month.
  4. Workers compensation insurance pay a median cost of $47/month and an average cost of $111/month.
  5. Commercial Umbrella insurance pay a median cost of $75/month and an average cost of $125/month.

However, these amount may vary from one business to another, hence lets checkout some factors that can help us reduce the cost of business insurance today.

7 Financial tips to lower the cost of business insurance:

  1. Reduce your workplace risk, Insurance companies like to deal with companies with lesser chances of risk.
  2. Ensure safety and precaution in your workplace.
  3. Avoid hazardous occurrence by eliminating potentials for hazard.
  4. Plan your business insurance cost and add it to your payroll.
  5. If possible pay your premium ahead of time.
  6. Bargain for discounts.
  7. Educate workers on your business insurance cost, insurance companies give leverage to well trained company staffs.

Incredibly article for you: 30 Gaps Between the Rich and the Poor

Types of insurance coverages

All types of insurance coverage can further be classified into the following:

Life Insurance or personal insurance, property insurance, marine insurance, fire insurance, liability insurance, guarantee insurance and social Insurance.

This implies that anything of value can be insured, it could be your business, car, property or even life.

Therefore, here are various types of insurance coverage available globally:

1. Health insurance:

This insurance covers the health of workers and individuals to care for expenses when they fall sick or in cases of terrible ailment and diseases. For instance: surgery

2. Car insurance:

You can’t afford to watch your $50,000 car get robbed or bashed by accident by one careless driver. Hence, this coverage will help you fix your damaged car or replace it in cases of unforeseen and unintentional brutal accident.

3. Life insurance:

This might not be visible for everyone but in advanced countries people insure their lifes in cases of sudden disasters that poses to death.

4. Homeowners insurance:

This is an insurance coverage for house owners in cases of Tsunami, windstorms, fire outbreak or earthquakes.

5. Umbrella insurance:

According to, umbrella insurance provides coverage for claims that may be excluded by other liability policies including claims like false arrest, libel, slander, and liability coverage on rental units you own.

6. Renters insurance:

This insurance covers rental businesses from thiefs. For instance, most people rent items and never get to return them for one reason or the other.

7. Travel insurance:

This covers the risk of motorist, travelers and commercial transport companies in cases of accident.

8. Pet insurance:

Dogs, cats, horses and domestic animals are insured in first world countries, hence you can insure your pets at will.

In conclusion:

I always advice successful small business owners not to risk collapsing their businesses while avoiding the cost of business insurance.

It costs lesser to pay a $100 monthly insurance policy premium fee than to pay $10,000 to cover a sudden financial loss from accidents, natural disasters or losses from lawsuits.

Hope I shared lights in this article? why not hit me up at the comment section.

Kindly share this article using the social share buttons below, thanks.

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