Why is my business insurance so expensive?
The higher the risk, the more you'll pay. For example, janitors, construction workers, and manufacturers often have some of the highest rates for general liability insurance, because they deal with (and could potentially damage) other people's property. Your liability risk matters as well.
The higher your expenses or operating costs, the more you can expect to pay for liability insurance. Claims history. If you've filed general liability claims in the past, it could increase your premiums.
Look for Package Deals
A BOP often packages general liability, property insurance, and business interruption insurance at a more affordable price than purchasing them separately. It's a great way for a small business to reduce your insurance costs.
More Claims
And when insurance companies have to pay out, they need to take more in. That's just how insurance works. If they ran out of money, they wouldn't be able to pay future claims. Over time, this leads to higher premiums for everyone (not just the ones who filed a claim).
On average, an insurance policy that offers coverage for up to $2 million can cost about $30 a month in premiums.
- Best overall: State Farm. ...
- Best for Customer Service: Nationwide. ...
- Best for Financial Stability: Chubb. ...
- Best for Commercial Auto: Allstate. ...
- Best Coverage Add-Ons: The Hartford. ...
- Best Landlord Coverage: American Family.
What is the most important insurance for a business to have? General liability & worker's compensation insurance.
You may have to pay a fee for early cancellation
Your insurance provider may require that you pay a short-rate cancellation fee for dropping coverage before the policy ends. Make sure you read your policy thoroughly before acting and ask your agent any questions you may have about early cancellation.
Raise your deductible.
Just like health, property or auto insurance, the quickest way to lower your premiums is to raise your deductible – or the amount you're responsible for paying when you file a claim for an accident or other event that qualifies for coverage.
Ask for a higher deductible
Your deductible, the amount you're responsible for before your insurance company starts chipping in, is tied to your premium. Typically, the higher the deductible, the lower the premium.
Why is insurance so unaffordable?
Healthcare system complexity
This complexity often results in administrative inefficiencies, increased paperwork, and higher operational costs for both healthcare providers and insurers. These added expenses are eventually passed on to consumers in the form of higher insurance premiums, deductibles, and copayments.
Things like the amount of risk your business faces and your claims history can influence your cost. Typically, small businesses that face more risk pay more for insurance. So, a construction company may pay more than an accounting firm.
An average monthly premium of $651 for single coverage per covered worker in small firms. An average monthly premium of $1,817 for family coverage per covered workers in small firms.
| Company | Forbes Advisor Rating | AM Best financial strength rating |
|---|---|---|
| Allstate | 5.0 | A+ (Superior) |
| Clear Blue Insurance | 5.0 | A- (Excellent) |
| Farmers | 5.0 | A (Excellent) |
| Acuity | 4.5 | A+ (Superior) |
- Best Overall: Next.
- Best for Independent Contractors: Hiscox.
- Best Restaurant Insurance: Huckleberry.
- Best for Financial Stability: biBERK.
- Best Budget Coverage: Thimble.
- Best Workers' Compensation Insurance: The Hartford.
- Best for Larger Small Businesses: Chubb.
At minimum, you should start with these types of small business insurance: General liability coverage. Workers' compensation coverage. Commercial auto coverage.
As you hit certain life milestones, some policies, including health insurance and auto insurance, are virtually required, while others like life insurance and disability insurance are strongly encouraged.
The Bottom Line
Most experts agree that life, health, long-term disability, and auto insurance are the four types of insurance you must have.
It is unlikely that an insured entity will get a refund on the insurance premium paid even if the contract is canceled before its expiry. In addition to this, the insured runs an additional risk of having to pay higher premiums when applying for new coverage.
Accidents Can Still Happen
A claim may still be filed after the policy period, but if the injury or damage didn't occur while the policy is in force, you're stuck with the bill. When an accident happens the day after you've let your coverage lapse, you will be the one paying the price.
How does business insurance work?
Business insurance covers losses related to unexpected events like lawsuits, accidents, or natural disasters, among others. Different types of commercial insurance products include general liability insurance, professional liability, property insurance, and home-based business insurance.
Defined Events Coverage
Unless the policy specifically defines a damage-causing event, no coverage will be rewarded to the claimant. Avoid policies in which the defined events are limited, improbable or irrelevant to your situation.
Car accidents and traffic violations are common explanations for an insurance rate increase, but other reasons why your car insurance rate can go up include changing your address, adding a new vehicle or driver, increases to claims in your ZIP code, and increases to car repair/replacement cost.
Although you can't negotiate your car insurance rate, you're not contractually obligated to stay with your insurance company. If you find a cheaper rate elsewhere, you can switch insurance providers. Depending on when you cancel and the fine print of your car insurance policy, you could incur fees.
Your personal history of making car insurance claims and your track record for paying your bill on time can both impact your premium rates. Multiple claims make you look like a risky driver, resulting in higher car insurance costs. And you might pay more if you have not maintained continuous car insurance coverage.
