Should my small business have business income insurance?
Asked by: Dr. Christ Miller | Last update: November 22, 2025Score: 4.1/5 (53 votes)
Is business income insurance worth it?
If an unexpected event forces you to close your doors temporarily, business income insurance can help cover your financial obligations until you can resume normal operations. Any business that relies on a specific location, equipment, or both should consider business income insurance.
Are small businesses required to have business insurance?
The quick answer is yes. Most businesses need liability insurance for small business. But there are several different types of liability coverage to choose from. The most common are general liability and professional liability.
What percentage of business income should go to insurance?
In general, small businesses can expect to pay anywhere from 1% to 5% of their annual revenue for business insurance. However, this is just a general guideline, and the actual percentage can vary greatly depending on the factors mentioned above.
What does business income coverage cover?
Business income insurance works with your property policy and provides coverage for events beyond your control such as fire, wind, hail, vandalism or damage from vehicles or aircraft that may cause direct physical loss or damage to covered property which interrupts your business.
Should My Small Business Have Business Income Insurance?
What should be included in business income?
Business Income: Business income is income received from the sale of products or services. For example, fees received by a professional person are considered business income. Rents received by a person in the real estate business are business income.
What percentage of my small business income should I pay myself?
Some financial advisors recommend you put aside 30% of your net profits for taxes, and 20-25% on retirement. Once you have set those aside, see how much you have left over to pay yourself. Retirement is another way to set yourself up for success in the future and have your own back.
How to calculate business income insurance?
- Calculate your total revenue.
- Subtract your business's expenses and operating costs from your total revenue. This calculates your business's earnings before tax.
- Deduct taxes from this amount to find you business's net income. Your net income will be your business income.
What is the best type of insurance for a small business?
General liability is recommended for all small businesses
Almost every small business needs general liability insurance. This liability coverage provides protection against common customer or client accidents, including bodily injuries, property damage, and personal injuries.
Can I run my business without insurance?
If you've asked yourself, “Do I need insurance for my small business?” The answer is yes. A small business insurance policy can help with protecting your assets and company. Without this coverage, small businesses may have to pay to repair or replace damaged or destroyed property on their own.
What kind of insurance does an LLC need?
General liability insurance, also known as business liability insurance, can help protect you from claims that your LLC caused bodily injuries or damaged someone else's property. Liability claims related to work done away from your business location may also be covered under products-completed operations coverage.
How long does business income insurance last?
Business Income coverage only applies during the period of restoration; if you have resumed operations, the period of restoration has ended. However, if your policy includes Extended Business Income coverage, there may be coverage for a continuing loss of Business Income after the period of restoration has ended.
Does business income include loss of rents?
Business Income & Loss of Rent Explained
This coverage can include reimbursement for ongoing expenses like rent, utilities, and employee wages, helping your business stay afloat during challenging times. Key coverage areas include: Revenue replacement. Operating expenses.
Why is my business insurance so high?
Your prior claims history.
Insurance companies will also look at your past claim history, if you have one. For example, if you've been sued a number of times for mistakes you've made in providing services, an insurer may consider this a trend that will continue and charge higher premium for the higher risk presented.
How much does business income coverage cost?
Business income insurance is included in a Business Owner's Policy (BOP) with The Hartford. Our customers pay an average annual premium of $1,019, or about $85 a month, for a BOP. Remember, business insurance costs will vary because every business is unique and faces different risks.
How do I calculate my business income?
Calculating gross income for a business is straightforward. It's your business's total revenue minus the cost of goods sold (COGS). One key factor is that gross income is before taxes and other expenses — COGS doesn't include sales and marketing costs, administrative fees, or taxes.
Does business income coverage have a deductible?
Does Business Income Coverage Have a Deductible? In most cases, business income coverage doesn't have a monetary deductible. However, there is sometimes a time deductible or a waiting period. Some insurers may have a waiting period up to 72 hours after the covered loss occurs before coverage starts.
How much profit should a small business owner make?
The profit margin for small businesses depend on the size and nature of the business. But in general, a healthy profit margin for a small business tends to range anywhere between 7% to 10%. Keep in mind, though, that certain businesses may see lower margins, such as retail or food-related companies.
Can I use my business account to pay my mortgage?
Unfortunately, you can't just pay your mortgage directly from your business bank account. Not only would this go against the bank's rules, but it would also be risky for your finances.
What's the best way to pay yourself as a business owner?
By opting for a salary over an owner's draw, there won't be any surprises when payday comes. Taxes are also withheld from your salary automatically, making it easier to pay income tax at the end of the year. Depending on your business structure, your salary may also be considered tax deductible for your business.
What is the best small business insurance?
- Best for variety of plans: Nationwide.
- Best for online experience: Next Insurance.
- Best for home-based businesses: The Hartford.
- Best for independent contractors: Hiscox.
- Best for medium-sized businesses: Chubb.
- Best for customer satisfaction: State Farm.
- Best for worker's compensation: Travelers.
How much is a $1 million dollar insurance policy for a business?
On average, a $1 million liability insurance policy costs $69 a month, or $824 a year, for our small business owners. Keep in mind that every business is different, so the $1 million liability insurance cost will vary.
How much does insurance cost for a startup company?
For example, general liability insurance, which covers common risks like third-party injuries and property damage, can cost as low as $500 and $1,000 per year for startups. As your business grows, you might see these costs go up due to needing higher coverage limits and dealing with more risks.