How to lower your small business insurance premiums
Insurance can take a big bite out of business budgets, but small business owners may find substantial savings by taking these 10 steps:
- Review your business insurance needs
- Shop around for the best rates
- Bundle your policies
- Increase your deductibles
- Improve workplace safety and security
- Review and update your business information
- Consider alternative insurance options
- Maintain a clean claims history
- Explore available discounts
- Work with a trusted insurance professional
Below, we take a more in-depth look at each of these ways to save.
1. Review your business insurance needs
Being underinsured is dangerous because it exposes you to costly risks. However, being overinsured can drain your budget through duplicate coverage or unnecessarily high limits.
You should conduct a detailed review of your insurance needs at least once a year. Start by mapping out your company’s risks and coverage requirements and then adjust your policies to account for changes in your operation.
2. Shop around for the best rates
Since dealing with insurance doesn’t often top small business owners’ list of fun things to do, it may be tempting to just accept the first quote you’re offered or to stick with an insurer you’ve been using for years. However, policy prices change and can vary significantly between insurance providers. It pays to shop around. Most experts suggest getting at least three insurance quotes before buying a policy and regularly reviewing your coverage.
Working with an independent broker can streamline this process and help you uncover cost-saving opportunities. When comparing quotes, make sure you’re looking at equivalent coverage levels and options.
3. Bundle your policies
Bundling is one of the most effective ways to save. A business owner’s policy, or BOP, combines general liability, property insurance and business interruption coverage into one package, often at a lower cost than purchasing each policy separately.
For instance, the average annual cost of general liability and commercial property insurance is $500 and $800, respectively, according to insurance broker Insureon. The average annual cost of a BOP is $684.
BOPs, however, only cover certain risks and are often limited to certain businesses. If your business needs more protection, a commercial package policy, or CPP, lets you add cyber liability, crime coverage and umbrella insurance to your bundle, among other options.
4. Increase your deductibles
One way to save is to increase your deductibles – the amount you agree with your insurer to pay out of pocket when you file a claim. The more risk you’re willing to handle yourself, the lower your premiums will be. But if you increase your deductible, be sure you have a financial cushion to cover those higher out-of-pocket costs if something goes wrong.
5. Improve workplace safety and security
Strong workplace safety measures do more than prevent accidents. They also position your business as a lower risk to insurers.
Simple steps like establishing safety protocols, training employees properly and beefing up cybersecurity can help lower your premiums.
“Take the time to look at your business from a risk perspective,” says Tyler Peterson, head of professional risks at small business insurer Hiscox.
Expert InsightBundling is one of the most effective ways to save. A business owner’s policy combines general liability, property insurance and business interruption coverage into one package, often at a lower cost than purchasing each policy separately.
6. Review and update your business information
Regularly updating your business information can find ways to reduce costs. For instance, your insurance premiums might be based on revenue projections that didn’t pan out or staffing levels you haven’t yet reached.
Taking a hard look at your company to ensure your policies reflect your current operations can potentially reduce your small business insurance costs.
7. Consider alternative insurance options
The amount of money businesses pay for healthcare premiums has soared alongside property and liability costs.
The average family premium for employer-sponsored healthcare rose 7% in 2024 to $25,572 (with workers paying just over $6,000), according to the October 2024 Employer Health Benefits Survey from independent health policy research source KFF.
However, there are ways for employers to save.
Take Health Reimbursement Arrangements (HRAs), for example. An HRA, according to healthcare marketplace HealthCare.gov, is an account-based health plan small businesses can offer their staff that reimburses workers for their medical expenses. An HRA operates either as a supplement to traditional plans or as a standalone option.
American Benefits Group, which sells benefits administration systems, says that combining a typical high deductible health plan with an HRA can reduce a company’s healthcare costs by lowering its premium. In addition, the group says, if your workers have fewer medical expenses than the amount you deposit in their HRAs, you can see even more savings.
8. Maintain a clean claims history
Insurance companies look closely at your claims history when setting rates. Multiple liability claims, like customer slip-and-fall lawsuits or property damage incidents, can flag your business as high-risk and drive up your premiums.
Taking steps to lower your risks, such as making sure hallways are well-lit and clear of obstacles, quickly removing snow and putting up “wet floor” signs, can prevent accidents and help keep claims low.
“The more actions you take to prevent risks and claims against your business, the more favorable it is to insurers,” Hiscox’s Peterson says.
9. Explore available discounts
Don’t be shy about asking your insurance agent to review every possible discount, from bundling discounts to safety discounts for installing security systems to choosing paperless billing. You might come across savings opportunities you didn’t know about.
Studies have shown that your personal work history and the employee safety training programs you have in place could trim your rates, and some carriers reduce premiums for being claim-free for several years.
10. Work with a trusted insurance professional
A knowledgeable insurance agent does more than just sell policies. They help you spot coverage gaps, identify cost-saving opportunities and navigate the claims process when needed. But this partnership only works if you’re completely transparent about your business operations.
“Sharing the good, bad, and ugly of your business will help ensure your business is adequately protected,” Peterson says. An agent who understands your complete business picture can better match you with the right coverage at the right price.
What our expert says
Q: How transparent should you be with your insurance agent?
FAQ
How often should I review my insurance policy?
Small business owners should review insurance policies at least once a year and when the business undergoes significant changes, like moving locations or adding new services. Major equipment purchases, staff changes, or revenue fluctuations can also trigger the need for policy adjustments.
What is a business owner’s policy and how does it help save money?
A BOP is packaged small business insurance that typically combines general liability, property damage and business interruption insurance into a single policy. Bundling the coverage usually costs less than buying separate policies and simplifies your insurance management.
Is self-insurance a good option for my business?
Self-insurance typically only works for larger companies that have deep financial reserves to cover potential losses. Most small businesses are better off having traditional insurance to protect against risks.
Will reducing the size of my business lower my insurance premiums?
Generally, yes. Your insurance costs change with the size of your business. Fewer employees, smaller revenue or reduced operations can lower premiums since you’re presenting less risk to insurers. But don’t just cut coverage – talk to your agent about right-sizing your policies.