There is no question that opening up a small business involves risk. In fact, roughly 50 percent of small businesses fail in the first 5 years.
The stats do not get better with time. Approximately 66 percent of businesses fail over a 10-year period. Furthermore, just 25 percent continue operating for 15 years or more.
The good news is that your new business can mitigate risk by taking out a small business insurance policy. Small business insurance protects against financial losses, theft, and other potential perils.
Read on to learn how much small business insurance costs. Also, explore how much coverage is offered and what your company will need.
What Is Small Business Insurance?
Before we dive into costs, it is important to explain exactly what small business insurance is. There are so many negative things that can happen to an existing or startup business.
Most glaring, there is the potential for financial loss. The business does not generate the projected revenue stream in the early months or even years.
There is also the risk that the business is robbed, vandalized, or hacked. In some cases, there are risks from nature like flooding or a lightning strike. Small business insurance protects your company against all of these potential risks.
How Much Does Small Business Insurance Cost?
Now that you understand what small business insurance is, it is time to talk about cost. The cost is going to depend on what type of coverage you take out.
Based on a survey of 18,000 companies, the average annual insurance cost was nearly $1,300. The median insurance cost was roughly $600.
It is important to note that the average cost can increase significantly depending on your elections. Below are several types of coverage that can drive up the cost if bundled together.
Liability insurance is one of the most common types. There are three different forms falling in this category; general, product, and professional.
Each one is designed to protect against financial loss. The events causing the financial loss vary from defective products and employee negligence to bodily injury.
Commercial Property Insurance
Commercial property insurance protects your place of business. It can cover multiple properties and locations. Protection covers events such as fire, vandalism, and severe weather.
Many small businesses are opting to work out of the home. Even larger businesses with hundreds of employees are authorizing home offices to reduce overhead expenses.
Your small business can purchase additional insurance to cover your home office. Typically, home-based insurance covers equipment and any bodily injuries to a third-party at the home.
Some small business owners need to bundle multiple different insurance types. This situation commonly occurs for businesses that operate out of a commercial property and a home. A bundled insurance plan is going to cost more than an individual type.
A Recap of How Much Does Small Business Insurance Cost
The answer to this question varies based on your company’s needs. The average business owner spends $1300. However, this amount may go up if additional coverage is required.
If small business insurance costs more than you anticipated and capital is required, talk to a specialist today about taking out a business loan.