How Much Insurance Should Your Business Have? A Comprehensive Guide

Business owners are often faced with the challenge of determining how much insurance coverage they need for their business. The amount of insurance coverage required can vary depending on the size and risk level of the company. Generally, businesses spend between 1 and 3% of their income on insurance coverage. To assess your insurance needs and begin your insurance search, you should first consider the size of your company.

Definitions may vary, but are generally based on the number of employees, total sales, and profits. The definitions below can help you determine where your company is at, and your insurance professional can also provide guidance.

Home-Based Businesses

Many successful commercial launches start at home. Home-based businesses typically consist of one or no additional employees and have relatively little income.

However, that doesn't mean the company shouldn't be insured. All businesses, including home-based businesses, must be insured against risks. According to the Small Business Administration (SBA), more than half of U. S.

businesses are headquartered in an owner's home and too many don't have adequate business insurance. While a home-based business is almost always, by most definitions, a small business, its location may require special attention to insurance coverage. Homeowners insurance alone won't necessarily cover your home-based business against the loss or liability of business property.

Large Companies

Large companies have at least 500 employees; income requirements depend on the type of company. Large, complex companies have multimillion-dollar risks, and commercial insurance is customized to meet specific business needs.

Large companies even have employees dedicated to analyzing the possible causes of accidents or losses, recommending and implementing preventive measures, and designing plans to minimize costs and damages in the event of a loss, including taking out insurance and managing claims. This practice is known as risk management.

Small Businesses

If you're running a small business, you usually have to act as your own risk manager. Sometimes a small business hires a risk management consultant. If you're not sure, ask an insurance professional to help you assess the risk for businesses of all sizes.

Businesses with multiple employees can expect to pay more for insurance because their chance of filing claims is greater than a company with fewer or no employees. Get Forbes Advisor ratings on the best insurance companies and useful information on how to find the best travel, auto, home, health, life, pet and small business coverage that fits your needs. We also consider the type of business you run, your location, coverage limits, deductibles and more to determine final premiums. Then, we'll help you find ways to save by identifying the discounts you can choose from and analyzing the different amounts of coverage, so that small business insurance is a smart decision for you and your wallet.

For example, small businesses in areas with high crime rates may pay more for general liability coverage. If your business must close temporarily due to a loss covered by your policy, business interruption insurance helps you replace your lost income and pay operating expenses during that time.


A large part of your final cost is based on the type of coverage your company needs, such as workers' compensation or professional liability. Talk to a licensed professional to help you find the best combination of coverage and insurance cost for small businesses.

The price of your insurance coverage depends on the size and physical condition of your office building or the location of your business.

Jenny Kizzia
Jenny Kizzia

Professional food ninja. Proud coffee expert. Friendly pop culture guru. Certified beer buff. Beer scholar.