6 Ways To Save Money on Business Insurance in 2023
Nathan Weller is an Insurance Expert focusing on insurance for small business. He has 15 years experience in insurance operations, FNOL, and claims handling.
This article is part of a larger series on General Liability Insurance.
Small business owners need insurance to protect their businesses but also need to protect the bottom line. The good news is it’s possible to find quality coverage at an affordable price. Start by identifying the right policies for your business and bundling any of those coverages. Then, compare providers’ offerings and look for any discounts. You’ll also want to manage the limits and deductibles and your risk to decrease the chance of claims.
1. Determine the Coverage You Need
When considering how to save money on insurance, it’s important to understand what type of coverage your business needs. A larger business that provides professional services and has multiple employees is going to need different types of coverage than a handyperson operation.
While this list isn’t exhaustive, these are the most common types of small business insurance coverage.
Common Coverages | What It Covers |
|---|---|
General Liability | Claims against property damage, bodily injury, advertising injury, and reputational harm |
Professional Liability | Claims that your advice/service led to financial loss or harm |
Commercial Property | Damage to listed property you own |
Inland Marine | Equipment and tools that are not at a fixed location |
Commercial Auto | Damage to your vehicle and caused by your vehicle |
Workers’ Compensation | Medical bills and lost income from a work-related injury or illness |
Cyber Liability | Cost to respond to a data breach |
The primary coverages you’ll need are general liability, property, and inland marine for your tools. Depending on your state, you may need workers’ compensation. Note that it’s possible to overspend by purchasing more insurance than you need.
This liability policy is the broadest and most common form of liability insurance for a small business. It offers protection against third-party claims that someone was injured or property was damaged because of negligence by your business. It also includes protection against claims of advertising injury and reputational harm. Usually, general liability policies will include premise coverage for a rented location.
Note that general liability is calculated differently for different businesses, meaning the premium can vary widely by industry. If you need guidance around this, then see our article on how a general liability premium is calculated.
For more on this policy, read our guide to general liability insurance. It covers costs by industry, factors that impact cost, and how to get it.
This coverage, often called errors and omissions (E&O), covers mistakes made by your business that result in a financial loss or harm to a third party. This is a core policy for service-oriented businesses like consultants, counselors, accountants, photographers, or pastors.
This is a first-party coverage important for businesses that own property. This can cover a building you own, or the office equipment and furniture you own in a space that you rent for your business. This type of policy usually provides coverage only for listed locations and for listed perils. This means if a listed location suffered a loss from fire, or theft, then you could file a claim.
This policy is a first-party coverage for your property that isn’t fixed but moves around. Think of tools and equipment for someone like a contractor or painter. Many providers will offer to include this with a general liability policy.
If your business owns a vehicle or uses one specifically for work, then you’ll need a commercial auto policy. The coverages provided by commercial auto are nearly identical to a personal auto policy: first-party coverages and liability. If your landscaping business has a dedicated work truck, or you plow snow in the winter, this is coverage you should consider.
Workers’ comp is required in nearly every state for companies with employees—with some even requiring self-employed workers’ comp. It helps an employee who was injured or became ill because of a job by helping pay medical costs and providing wage replacement. It also helps the employer by protecting them from lawsuits and helping the injured employee return to work.
Cyber insurance has different levels of protection and services depending on what policy you buy but ultimately, this is important coverage for any business that stores sensitive information online or works in the online retail space. It helps your business if you suffer a data breach by responding appropriately to all impacted parties.
2. Bundle Coverages
Another way to save money on your business insurance is by finding out if there are any discounts available through bundling coverages. Bundling can take different forms. You can get a business owner’s policy (BOP), a commercial package policy (CPP), or multiple policies with one provider.
This is the most common type of bundling—it combines two policies: commercial property and general liability. Most providers also include lost business income in a BOP.
There are two advantages to purchasing a BOP:
- Cost: Most providers offer a 10% to 20% discount when you purchase a BOP.
- Convenience: You will have one policy for multiple coverages, making it easier to manage the policy and file claims.
Not every business is eligible for a BOP. The criterion varies by carrier—another good reason to shop around—but, generally, they place limits on the number of employees, amount of revenue, and physical size of the business that the carrier will offer a BOP.
Learn more about the costs and coverages through our guide on a BOP.
A BOP is usually intended for less risky businesses with 100 or fewer employees and revenue capped at around $5 million. If your business is too big for a BOP, then you may want to check out a CPP. A CPP combines two or more policies. It’s more flexible than a BOP because you can bundle coverages beyond property and general liability, such as commercial auto.
Even if the policies you purchase from one company cannot be bundled to make one policy, some providers offer a discount if you have several policies through it.
3. Compare Providers
To get insurance for your business, you can work with an agent, a broker, or directly with a carrier. If you need guidance on whom to go with, refer to our comparison of insurance broker vs carrier.
An advantage of a broker is being able to compare quotes simultaneously from multiple providers. Take your time—it’s OK to go a step further by comparing those quotes to ones from another broker. And even if the other broker works with the same provider, that doesn’t mean the quote will be the same. If you do this, you’ll be surprised at the level of coverage, the wide range of premiums, and the amount of money you can save.
Consider these quotes we received from three different online brokers. The business we were seeking a quote for was a small retail business with three employees and an annual revenue of $160,000:
- CyberPolicy provided one quote for a BOP through Chubb. It cost $485 annually and carried $1 million per occurrence and $2 million aggregate limits for general liability. It also had $15,000 in business property with a $500 deductible.
- Simply Business provided two quotes for general liability. Both policies had the same limits of $1 million per occurrence and $2 million aggregate:
- One through Harborway cost $303 annually, which was only for general liability
- The other was through Hiscox and cost $500 annually
- CoverWallet offered four BOP quotes.
- Two of the quotes, from Liberty Mutual and Chubb, did not have any coverage information, and you had to call to learn more. The cost was $675 annually for Liberty Mutual and $852 for Chubb.
- The Hartford offered a BOP for $972 annually with $1 million per occurrence and $2 million aggregate in general liability. It also had $15,000 in business property protection with a deductible of $500.
- CNA provided a quote for the same coverage as The Hartford, except the deductible was $1,000 and the cost was $776 annually.
In this example, we were able to obtain seven quotes for the same business from three different online brokers. The cheapest BOP was from CyberPolicy for $485, with the policy underwritten by Chubb. The most expensive BOP was $972 annually, for a difference of $487.
If we only needed general liability, the cheapest policy is from Simply Business for $303. Simply Business is one of our cheapest general liability insurance companies, specifically for comparing quotes.
4. Look for Discounts
Some discounts are spelled out on providers’ websites:
- Home-based business: Some providers, such as Hiscox, offer discounts for home-based businesses.
- Paid in full discount: Many customers will save, sometimes as much as 15%, when they pay their policy in full. Conversely, many providers charge more if you pay monthly installments.
- Safe driving programs: If you need commercial auto insurance, providers like Progressive have telematic programs to monitor safe driving and will provide a discount if you participate.
- Licensure: If your field has optional certifications, obtaining these may result in a discount for your policy.
- Membership: Many professional organizations have deals worked out with carriers to provide discounted insurance rates to their members.
Other discounts may not be indicated but are applied to the quote. For example, when you’re getting a quote, the provider may ask questions about:
- Sprinklers, fire alarms, and security systems
- Training in alcohol awareness programs, like TIPS, for restaurants serving alcohol
- Firewall, data storage, backup, and protection
Depending on your answer, the premium price can be higher or lower. This is an example of a built-in discount. Risk management is a great way to take advantage of built-in discounts.
5. Manage Limits & Deductibles
The limits your business needs are related to your level of risk and the value of the property you need insuring. It’s possible to have your property either overinsured or underinsured. Reviewing what limit is right for your business with an agent or a broker may lead to some savings on your premium.
The policy limit is the total amount of coverage available either per claim or for the policy term—and it’s not one size fits all. But often, when getting a quote, the provider will offer a general liability limit of $1 million per occurrence and $2 million aggregate regardless of the size of the business, number of employees, or revenue.
That may be too much or too little for your business. If it’s too much, then you can save money by lowering the limits of your insurance to be more in line with the type of revenue, assets, and risk of your company.
Some insurers will perform a general liability audit. Similar to a workers’ comp audit, this will examine your payroll, revenue, and risk to determine if your coverage is correct. This is a good way to ensure your limits are appropriate for your business. If the provider determines your limits were too high, it can issue you a refund for the overpayment on the premium.
Other providers, like Next Insurance, will give you multiple options with different limits when you are getting a quote. Doing so gives you some flexibility in picking a policy with a correspondingly appropriate cost.
For the purposes of this article, we received three quotes from Next for a retail store. The quotes were broken down with different limits and amounts of coverage:
- Basic: Cost $25 monthly and had $1 million in total general and product liability.
- Premier: Cost $57.26 monthly and had $2 million in total general and product liability; also had $17,000 in business property coverage.
- Deluxe: Cost $101.26 monthly and had all the premier’s offerings, with other additions like equipment breakdown and $50,000 in lost business income if your website goes down.
Depending on your business, Basic’s $1 million limit may be all you need, so you would only have to spend $25 a month for insurance. However, if your business has property or larger operations, then you will want either Premier or Deluxe.
Another way to save money is by raising your deductible, which is the amount you agree to pay when you file a claim, regardless of who is at fault. The deductible usually applies for the same amount every time you file a claim. If you raise it from $500 to $2,000, then your premium usually will decrease. Of course, there’s a risk here because you’re agreeing to pay more out of pocket when you have a claim.
6. Manage Risk
A key part of determining the premium is your claims history. This means doing whatever you can to minimize the risks that lead to claims can help you save money on your business insurance. This will look different for every business, but there are many common steps you can take to manage risk, such as
- Cleaning up spills immediately
- Keeping walkways clear of any tripping hazards
- Maintaining your equipment, such as sprinklers and smoke alarms
- Posting signs if there’s a problem
- Using written contracts and keeping records of all communication
- Teaching employees how to avoid cybercriminals
Most carriers have risk management engineers and offer risk management assessments. Taking advantage of these can help reduce your frequency of claims, thus helping keep your premium low.
For example, Hiscox offers Paladin Shield for free to its cyber security insurance policyholders. Insureds that have used Paladin Shield end up filling claims at a rate of less than half of the insureds who don’t use it. Some providers may also offer a discount for completing risk management training.
Insurance carriers use class codes to classify risk. To learn about this, read our guide on what general liability insurance class codes are. It covers how they work and how they impact your premium.
Bottom Line
There are ways to find cheap small business insurance while still maintaining quality coverage. By following these six ways to save money on business insurance, you can let the provider protect your business so that you can focus on running it without breaking the bank on your premium
Next Insurance is a small business provider that will work directly with consumers and provide tailored coverage options to fit your business needs. You can get a quote and purchase a policy online in minutes, and then manage that policy online or on its app. As a bonus for those looking to save money, Next doesn’t charge more for insurers paying monthly.
