August 22, 2022

How Much is Business Insurance in California?

There are approximately 4.1 million small businesses in California that employ 7.2 million workers.

Businesses are exposed to various risks, including fire, legal suits, natural disasters, workplace accidents, and business interruption.

In addition, California state laws require businesses with employees, whether part-time or full-time, to acquire workers’ compensation insurance.

To that end, business insurance is a necessary expense vital for survival and compliance.

Understanding business insurance pricing and requirements can shape your financial planning and business strategy.

The Estimated Cost of Small Business Insurance

Typically, businesses require several insurance policies to fulfill operational and regulatory obligations.

For instance, a lawyer requires professional liability insurance, employment practices liability insurance, auto insurance, business owner’s policy insurance, cyber liability insurance, and workers’ liability insurance.

Each policy has its unique risk assessment model and pricing. In addition, different insurance companies offer a wide range of pricing.

Most businesses pay an average of $110 per month for a workers’ compensation policy.

On the other hand, you’ll be required to pay between $60-$100 for professional liability insurance.

Ultimately, each business pays a different cost to cover the underlying risks.

Factors That Determine the Cost of Business Insurance

Nature of Business

Some business models have a higher inherent risk than others.

For instance, the risk of bodily injury in the manufacturing industry is higher compared to that in the legal profession.

Considering that, a manufacturing company pays more premiums for a worker’s compensation policy than law firms.

Luckily, small businesses with fewer employees or negligible risk exposure will pay affordable premiums.

Claim History

The insurance company will assess the claim history. A business with several fire claims in recent years indicates an inherent fire risk.

As a result, an insurer can place a higher premium to compensate for potential negligence, exposure to fire hazards, or poor workmanship.

Rented or Own Business Premises

A business owner who operates a business from rented premises has a different risk profile from someone operating on their premises.

For instance, a real estate agent will pay less premium for property insurance compared to a restaurant in a rented space.

Remember, a real estate office is predominantly used for administration reasons. On the contrary, the restaurant receives deliveries and has an existential fire hazard.

Lastly, you’re likely to pay higher premiums if you own the building hosting the real-estate office.

As a proprietor, you’ll be required to pay a fire premium for the building, furniture, fittings, and other installations like HVAC.

Number of Employees

Insurers use the number of employees, among other factors, to compute the payable premiums for professional liability cover or worker’s compensation cover.

A significant headcount implies more considerable risk and, as a result, higher premiums.