The value of business insurance: Is it worth the money?

In this Article:

• How much does business insurance cost?
• How do you know what kind of business insurance you need?
• An event planner learns the value of business insurance
• Another benefit of business insurance
• Frequently asked questions

It’s often said that insurance is the one thing you buy, hoping that you’ll never need it. It’s true that no one wants to have to file an insurance claim, but when the unexpected happens, you’ll be glad you have the coverage you need.

Here’s an in-depth look at the value of business insurance.

How much does business insurance cost?

To determine the value of a business insurance policy, start with the cost.

The cost of business insurance depends on several variables. There are different kinds of business insurance, and they are all priced differently. You may need one or more types of insurance, depending on the type of business you have and the services you provide. Plus, your coverage will depend on things like the size of your business (payroll and/or revenue), the type of business you are in, the location of your business, among other things. 

👉 The best way to find out how much insurance will cost for your business is to get a quote. That will tell you exactly how much it will cost to protect the business you’ve worked so hard to build.

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How do you know what kind of business insurance you need?

Most businesses need general liability insurance to cover claims by someone else that you damaged their property or caused a bodily injury. If you provide professional advice, you should also have professional liability insurance, which can cover your costs if you’re sued for negligence or faulty workmanship. If you use computers in your business, consider cyber security insurance to protect your business from a data breach or ransomware attack. And if you have employees, you may be required to have workers compensation insurance.

It's important to get the right coverage to protect your business, but you also don’t want to buy more insurance than you need. If you’re unsure what type of insurance you need, you can find out in 20 seconds here.

📢 Related: How to choose the best insurance for my small business

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An event planner learns the value of business insurance

📌 Here’s an example that shows the benefit a business may get in exchange for the amount they pay for insurance.

An event planner is hired to plan a large fundraiser for a non-profit organization. This event is typically responsible for raising the majority of the non-profit’s revenue for the year. The event planner sends out the invitations with the wrong date. The error is discovered a few days before the event, and the planner sends out email corrections, but many of the prospective donors are unable to make the new date, and the event falls far short of its fundraising goals. The non-profit sues the planner for the error, estimating that they lost $250,000 in donations.

The event planner now has to go to court or mediation sessions, taking time away from work to do so. They have to hire an attorney to defend themselves, and they may have to pay a settlement or judgment. These costs could total $300,000 or more, which would all come out of the event planner’s pocket.  

If, however, the event planner had the foresight to purchase professional liability insurance and general liability insurance, they might have paid around $750 per year, depending on the size of their business. In this example, their professional liability insurance policy could cover their defense costs, the settlement or judgment, and even the amount of income they lost by not being able to work while they were busy with the trial or mediation. The event planner would only have to pay their deductible, which, in this example, would have been $5,000.  

If the event planner had their insurance policies for five years before this claim, they would have paid out about $3,750 in premiums, plus the $5,000 deductible, for a total of $8,750. If they did not have insurance in this scenario, the event planner would have had to pay all of the $300,000 out of their own pocket, which could have put them out of business.  

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Another benefit of business insurance

Your business insurance can provide another benefit to you, even if you never have a claim. A business insurance policy can help you get more business. Here’s how.

More and more companies are requiring that their vendors and subcontractors have insurance so that if something goes wrong, they’re not left holding the bag. When you purchase business insurance from Hiscox, you’ll get a certificate of insurance, or COI, that shows potential customers that you’re insured and ready to work. Having your insurance in place before you bid on or apply for a job can help you get your bid in faster than the competition.

📢 Related: What is a certificate of liability insurance?

💡✍ It can be tempting to try to cut corners with the cost of business insurance. But if you look at the numbers, you can see that the benefits far outweigh the costs. Get a quote for this valuable protection for your business today.

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Frequently asked questions

Is business insurance tax deductible?

Yes, business insurance premiums are generally tax deductible as an ordinary business expense. This includes general liability, professional liability, business property, and other commercial policies. The deduction reduces your taxable income, effectively lowering the real cost of your coverage. Consult with a tax professional to ensure you're claiming all eligible insurance-related deductions for your specific business situation.

What happens if I'm underinsured and a claim exceeds my policy limits?

If a claim or judgment exceeds your policy limits, you're personally responsible for paying the difference out of pocket. This can result in significant financial hardship, potentially forcing you to liquidate business assets, drain savings, or even file for bankruptcy. Many businesses carry insufficient coverage without realizing it. Review your policy limits regularly, especially as your business grows, and consider whether your current coverage adequately protects your revenue and assets.

Can I cancel my business insurance if I haven't had any claims?

While you technically can cancel most business insurance policies, doing so leaves you completely exposed to financial risk. Many contracts and leases require continuous coverage, and gaps in insurance history can result in higher premiums when you reapply. A claim-free history doesn't predict future risk. One lawsuit or accident can occur at any time, and the financial consequences of being uninsured typically far exceed years of premium payments. Learn more about why business insurance is essential even when you haven't experienced claims.

How quickly does business insurance coverage begin after purchase?

Most business insurance policies provide immediate coverage once your payment is processed and your policy documents are issued. With Hiscox, you can receive your policy documents and certificate of insurance within one hour of purchase. This means you can secure coverage quickly when bidding on time-sensitive contracts or responding to client insurance requirements, giving you a competitive advantage in winning new business opportunities.

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