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7 Factors That Affect Your Small Business Insurance Cost

7 Factors That Affect Your Small Business Insurance Cost

You’ve registered with SunBiz.org, signed a lease, and maybe even hired your first employee. But then a friend asks about your insurance. What does small business insurance cost, anyway? What should you expect?

Your business insurance premiums depends a lot on your unique business, but it doesn’t help you to just say, “It all depends; contact your agent” without also giving you a little bit of insight into how several different factors affect your small business insurance cost.

Let’s go over some of these factors one by one.


#1. Type of Business

icon of a storefront

Perhaps the #1 factor determining your business insurance cost is the type of business or industry you’re in.

A construction company is open to a lot more risk than a bookkeeping office, so don’t be surprised if your independent insurance agent starts asking detailed questions about the line of work you’re in.

Another thing your insurance company wants to know before insuring you? Details about how your business works. You started a company because you wanted to carve out a unique niche in your space, and how you run your specific business will have a lot to do with the cost of your commercial insurance premiums.

Will your restaurant allow customers to grill their own shish kabobs right at the table? Does your business model have employees walking into customer’s homes or working directly with their children? These are things that increase your risk and therefore, your insurance premiums.

If your business draws up contracts for clients to sign, this is also something your insurer might want to take a look at. The types of contracts you sign are helpful for determining risk for Professional Liability insurance.


#2. Your Level of Expertise

antique pocket watch

Another factor that affects the cost of your business insurance is how experienced you are in the line of work that you do.

Your insurance agent might also ask for details about your level of expertise: how long you’ve been in business, what type of education you have, and whether your employees hold any qualifications. Business owners with lots of education who have been around for a while have shown their insurance company that they are not a fly-by-night operation, and therefore have lower risk (and lower business insurance cost).


#3. Your Annual Revenue

illustration of man standing on stairs made of money

Insurance can be rated in several ways. It’s simple math: higher revenue, more employees, or more square footage can all mean higher insurance premiums.

It all comes down to how much your business is worth and how active your business is. If you are sued (hey, it can happen to anyone), the insurance company wants to know how much you (as well as the insurance company) could stand to lose.


#4. Your Business Location

bird's-eye view of illustrated buildings on street corner

Even if you run an e-commerce business, where you work has a lot to do with your business insurance costs.

The larger your office, storefront, or warehouse, the more square footage left open to risk. Will your location receive lots of customer foot traffic? That’s more opportunity for slip-and-fall accidents and other claims.

Your location’s physical condition also has a lot to do with your commercial insurance costs. Newer construction often gets you lower insurance premiums than older construction, which might not be up to code.

Lastly, they’ll want to know the location of your business. Areas that are more prone to high crime, flooding, or other risks will increase your business insurance cost.

The state your business is in can also affect your insurance premiums. Some states are more lenient towards the plaintiff in lawsuit cases, meaning that businesses who are sued will end up paying more than they would in another state.

If you have a choice as to what state to do business in, it’s worth taking a look at the “insurance-friendliness” of each state before making a decision.


#5. Your Employees

flat illustration of three diverse people

It’s not just outgoing payroll that needs to be considered when hiring a new employee. Your insurance rates can change when you start a large hiring wave.

Businesses with more employees will pay higher general liability, error and omissions, and worker’s comp rates.


#6. The Policy You Want

illustration of three contracts with one signed

Asking “what does business insurance cost?” is a bit like asking “what does a car cost?” It depends on the features you’re looking for.

The more policies you add, the higher your premiums are going to rise. (Just like those heated seats are going to cost you a little extra than the standard model). Sometimes, the nature of your business will determine the types of insurance policies you need to buy, but other times, it will be up to you.

Another couple of things to consider are your limits and deductibles. If you want high limits and low deductibles, those plans are going to cost you more per month than one where you assume more of the risk.


#7. Claims History

claims folder in file cabinet

This is the case with any insurance policy: more claims in the past typically indicates more claims in the future.

If your business has a long claims history, the insurance company will charge you higher premiums to cover the risk of covering you.



We said we wouldn’t say it, but we have to: your business insurance cost depends a great deal on many factors related to your business.

Although there is no way to give you a concrete estimate in a 1,000-word blog post, we hope that we’ve been able to give you some good information on what to expect when you’re looking for a business insurance quote.

All told, you’ll have to contact your independent insurance agent to get some numbers to work with. But having these seven factors in mind can give you some idea of what to expect when it comes to your business insurance costs.

We can’t wait to hear from you!


About the Author

Jason Levine

Jason received a Masters of Science & Management in Risk Management & Insurance from Florida State University. He has been with Harry Levine Insurance for 9 years and handles the leadership of daily operations. He was the 2013-2014 Florida Association of Insurance Agents Young Agent Council's Agent of the Year. Currently serves on FAIA Board of Directors.

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