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Posted By Pablo Conde on March 30, 2014 in Business Insurance
Pablo Conde



How Much are Typical Commercial Insurance Rates?


Commercial insurance rates depend on a number of factors

If you’re a small-to-medium sized business owner who is contemplating the purchase of commercial insurance, then the first (and very obvious) question you might be asking is: How much does commercial insurance cost?

The answer is a familiar one: It depends.

What does it depend on? It depends on the size of your business, your business model, and the perceived risk level associated with that business model.

1. What Is Commercial General Business Liability Insurance?

Commercial general business liability insurance will pay obligations that occur if somebody files a claim against your company for damages and wins. For example, if somebody gets hurt on your property and sues your business to cover medical expenses, you can expect that your insurance company will pay those costs, minus the deductible of course.

Basically, this is what you can expect this type of insurance to cover:

  • Personal injury damages to people (other than your employees) who have been physically hurt because of your business operations
  • Damage to your business property
  • Liability you assume by entering into a contract
  • Claims against you for libel or slander
  • Liability incurred because your business serves alcoholic beverages (even if the business just serve beverages at certain company events)
  • Legal fees associated with any one of the above actions against your business

2. What Does Commercial General Business Liability Insurance Cost?

The first thing that you need to understand when arriving at an estimate of insurance premiums is how much of a perceived risk is associated with your business model. If you’re hand stitching stuffed animals and selling them on Etsy, your risk is far lower than someone who owns a construction company with employees who work on skyscrapers.

Insurance companies are all about putting a price on risk. In a nutshell, that’s the business model for every insurance company. So, if your business operates in a high risk environment, you can expect to pay more in premiums.


Insurance companies put a price on risk

The SBA provides a ballpark figure of $750 to $2,000 annually for most businesses. However, if your business is in a high-risk category then you could pay well into the thousands annually for your business insurance needs.

3. A Few Examples

If your business is a small consulting firm with only a couple of employees (or none) that takes in less than 1 million dollars in annual revenue, then here’s what your typical policy would look like:

  • $1 million coverage limit per occurrence
  • $2 million coverage limit annually
  • $300,000 coverage for damage to rented premises
  • $10,000 in medical expense coverage

That type of coverage will cost you somewhere between $500 and $900 annually.

Another example: Suppose you’re an independent contractor who develops web pages for a living. You have no employees and you operate as a sole proprietor. Here’s what your coverage would look like:

  • $1 million in coverage per occurrence
  • $2 million in coverage annually
  • $300,000 coverage for damage to rented premises
  • $10,000 coverage in medical expenses
  • $10,000 coverage in business property
  • $50,000 coverage in computer and media coverage
  • $5,000 coverage for your laptop computer

Your annual premium for that policy would range from $425 to $900.

Finally, suppose that you own a fairly large consulting company. Your business has between 6 and 10 employees on staff but work with 10 to 50 software developers (contractors, in this case). Here’s what your coverage would look like:

  • $1 million in coverage per occurrence
  • $2 million in coverage annually
  • $300,000 coverage for damage to rented premises
  • $10,000 coverage in medical expenses
  • $100,000 coverage in business property
  • $150,000 coverage in computer and media coverage
  • $5,000 coverage for your laptop computer

For that type of coverage, you can expect to pay about $3,600 annually with a $1,000 deductible.

For most businesses, commercial general business liability simply isn’t an option. This is a very litigious age, and you can expect to be sued for something. Be sure that you’re prepared with a quality insurance policy.