Small business owners can sometimes get stuck between protecting their business and their bottom line. The two can seem like they’re at odds with each other, but they don’t have to be. You can find cheap small business insurance that gives you the coverage you need without breaking the bank if you follow these six simple steps.
1. Evaluate Your Business Risk
In some ways, insurance is pretty simple. Each policy covers a different type of problem that could cost your business money. So the first step to finding cheap business insurance is to figure out which policies you actually need so you don’t end up spending money on unnecessary policies.
For a small business owner, that means focusing on general liability insurance. It’s a fundamental coverage because it pays for incidents that can happen to a third party in just about any business setting, namely:
- Bodily injury
- Property damage
- Personal and advertising injuries
A study by The Hartford, reported in Insurance Journal, puts general liability claims like these in the top 10 for most costly and most common:
- Reputational harm (such as libel and slander): $50,000, tied for sixth-most common
- Product liability: $35,000, tied for sixth-most common
- Customer injury or damage: $30,000, tied for sixth-most common
- Customer slip and fall: $20,000, tied for fourth-most common
Almost every small business needs general liability coverage, but some need more than others. For instance, a business with a lot of foot traffic, such as a brick-and-mortar store or restaurant, has a greater chance of seeing a lawsuit over a customer injury than a bookkeeper. That’s not to say the bookkeeper is free of any general liability risk. Their risk is simply lower in comparison.
Note: Some business owners confuse general liability and public liability insurance. While similar, public liability policies do not cover personal and advertising injuries, such as defamation and copyright infringement. This means public liability is usually cheaper than general liability, but the coverage is limited and may end up leaving you underinsured.
Once you’ve assessed your general liability risks, then you can take a look at other possible exposures and the policies that cover them. The chart below outlines the basics.
Small Business Insurance Policies
Insurance Type | What It Covers |
|---|---|
Accusations your business caused a third party’s bodily injury, property damage, or reputational harm | |
Accusations that your business’s negligence or mistake caused a client’s financial loss | |
Accidents involving business-owned vehicles | |
The costs of repairing or replacing company property, such as tools or furniture | |
Employees’ medical bills and partial lost wages after a workplace injury | |
Extends liability coverage limits for general, auto, and workers' comp policies |
Not every business needs every type of business insurance policy. Take errors and omissions (E&O) insurance, also called professional liability. It protects your business if you’re accused of making a mistake or failing to meet professional standards, and it’s usually purchased by people who make a living off of their professional expertise. Not every business owner is exposed to this risk, so not every business owner needs an E&O policy.
Sometimes, small business owners can’t find cheap business insurance because major insurance carriers feel better about a business when they can see its track record. But there are carriers that specialize in small business insurance. Hiscox, for one, is willing to offer coverage to new businesses and independent contractors—plus, it tops our list of cheapest general liability insurance companies. You should give the provider a try if you’re struggling to find affordable coverage.
2. Estimate Your Small Business Insurance Costs
Your next step is to try and estimate how much your business insurance is going to cost. How can you know if your coverage is cheap if you have nothing to compare it to? Unfortunately, insurers keep premium information pretty close to their chests—but for a good reason. They evaluate several factors to come up with pricing. As a result, two rather similar businesses can pay significantly different premiums for the same policy.
Industry tends to play a major role in price, so we researched annual premiums in several industries to come up with the information below.
Small Business Insurance Premium Estimates by Industry
Insurance Type | Sole Proprietor | Office | Retail | Health & Fitness | Construction |
|---|---|---|---|---|---|
General Liability | $250 | $400 | $800 | $600 | $900 |
Workers' Compensation | N/A | $210 | $2,210 | $5,630 | $5,930 |
Commercial Auto | $750 | N/A | N/A | $750 | $1,200 |
Business Property | $500 | $750 | $5,000 | $500 | $1,500 |
Errors & Omissions | $500 | $500 | $2,600 | $650 | $800 |
Umbrella Liability | $200 | $200 | $1,150 | $600 | $2,400 |
These figures are only estimates based on low-risk businesses with fewer than five employees. However, we’re only presenting them to give you an idea of what a business in your industry might pay. Your business could pay quite a bit more or less if your operations, revenue, or size call for it.
3. Compare Offers From Several Carriers
Even if you get a quote that’s less than what’s listed here, you want to get a couple of more offers to evaluate whether the coverage meets your needs. Note the focus on coverage rather than price. Premium definitely matters, but you don’t want to sacrifice coverage to get cheap small business insurance because it can end up hurting you in the long run.
When your comparing policies, you want to pay particular attention to:
- Coverage limits
- Exclusions
Let’s take a closer look at each of these.
Coverage Limits
The first thing to look at is your coverage limits. A coverage limit is the amount your insurer pays in a claim. One policy may be dirt cheap, but that may be because the insurer is offering very low limits.
It seems simple enough, but policies can have multiple limits, such as:
- An aggregate limit, or the total amount your insurer pays for claims throughout the policy term.
- A per-occurrence limit, or the amount your insurer pays for any one claim.
- Sublimits, or the amount your insurer pays for a particular type of loss like a sublimit on punitive damages in a professional liability policy
Standard general liability insurance, for instance, has six separate limits, and each impacts your coverage in different situations.
That seems like a lot to handle, but the key is to know that there may be more than one limit and to ask questions about them before you sign up for a policy.
Exclusions
An exclusion is a peril, circumstance, or property that’s not covered by an insurance policy. Basically, insurance policies have insuring agreements that lay out the coverage in broad terms, and the exclusions narrow the coverage down.
Exclusions are where many small business owners run into trouble because they assume something is covered when it’s not. However, every policy lists its exclusions. They’re a nightmare to read—without a doubt—but knowing what’s there is a good way to know if you’re getting the right policy and if the coverage is sufficient. For example, if your low-cost general liability policy doesn’t cover the actions of your employees—don’t worry, it usually does—then it might not be worth the premium.
When you shop for insurance, you typically have to apply with each insurance carrier separately. Working with a broker like CoverWallet, however, eliminates that paperwork. You apply through a quick online application that often returns several quotes for you to compare. If you need help with the details, you can talk to an insurance expert for assistance.
4. Bundle Policies
Just like you might get a discount when you bundle your home and personal auto coverage, you can usually save money when you buy several policies with one insurer. In fact, insurance companies often have a bundle designed specifically for small businesses called a business owners policy (BOP) that combines general liability, business property, and business interruption coverage.
BOPs are more affordable compared to standalone general liability, but not every business is eligible for the bundle. The criterion varies by insurance carrier—another good reason to shop around—but they generally place limits on the number of employees, amount of revenue, and physical size of the businesses that the carrier will offer a BOP to.
Businesses that are too big for a BOP may want to check out a commercial package policy (CPP). A CPP combines two or more policies for small and midsized businesses (SMBs). It’s more flexible than a BOP because you can bundle several coverages.
Even if you don’t qualify for a BOP or a CPP, you may still get a discount. Hiscox, for example, gives you a 5% discount for getting multiple policies.
5. Manage Your Risks
Your claims history is an important part of how insurance carriers determine your premium, so you want to do your best to minimize the risks that lead to claims. What that means depends largely on your operations and the particular policy. For example, part of managing general liability risk means keeping customers safe from hazards, so you may want to:
- Clean up spills immediately
- Keep walkways clear of any tripping hazards
- Maintain your equipment
- Post signs when if there’s a problem
Other policies have other risk management techniques, such as:
- Professional liability: Use written contracts and keep a record of all communication
- Workers’ compensation: Make safety equipment mandatory
- Cyber insurance: Teach employees how to avoid cybercriminals
- Commercial property: Install a security and fire safety system
These are just examples but, hopefully, they give you an idea of what you might do to lower your risk. Take the time to evaluate what problems your business might face and take steps to guard against them.
6. Look for Discounts
Insurers often give discounts for doing things that benefit them, such as buying multiple policies. Luckily, many of those things also benefit your business. These include:
- Installing sprinklers, fire alarms, and security systems
- Enrolling in a safe driving course or the insurance company’s safety training
- Opting for a paperless policy
Sometimes, the discounts aren’t spelled out in your policy. For example, insurers may charge a lower premium if your business operates out of a building that’s new or that’s near a fire hydrant or fire station. Additionally, insurers usually specialize in particular industries and can offer lower rates to businesses in those industries, which is yet another reason to shop around.
You might also want to check with any professional organizations you belong to. Most offer discounted liability policies for members. If you go this route, be sure to look at the policy details closely. Your options are often limited, so you need to make sure the coverage they offer fits your business.
Making sure you shop for quotes and comparing policies apples to apples is important when looking for cheap business insurance.
Bottom Line
Every business owner worries about their budget, but there are ways to find cheap small business insurance. Start by identifying your risk and finding the policies that cover them. Remember that focusing solely on the lowest rates doesn’t always mean you’ll get appropriate coverage.
CoverWallet can help you find small business insurance that fits your budget without leaving you underinsured. One simple application gets you free online quotes in minutes so that you can compare hassle-free.
