Short answer
Many small firms we see spend roughly 1% to 2% of revenue on their full insurance program. That range gives owners a rough design firm insurance budget benchmark, though pricing depends on the firm, state, claims history, limits and vehicles. A firm above that range is not necessarily overpaying, but the bill may be worth splitting by policy. Auto, oversized limits and policies that were never re-marketed are the usual drivers.
Why a percentage helps with a design firm insurance budget
A share of revenue gives owners a quick sense of scale. Premiums are hard to compare across firms, because every firm has different services, limits and vehicles. Treat the percentage as a gut check, not a rule.
Most owners never see a benchmark. A firm that has renewed with the same carrier for years often has no idea whether its total is typical. A percentage gives that owner a starting point for questions.
What goes into the total
The total usually combines several policies, and each one responds to different risks. For architects and engineers, the main lines are:
- Professional liability, which covers claims from professional services
- General liability or a business owner’s policy (BOP)
- Workers’ compensation, which depends on payroll
- Commercial auto, which depends on vehicles and drivers
- Cyber liability
- Umbrella liability, which sits over other policies
Here is a hypothetical. A firm with $500,000 in revenue and a 1% to 2% program would spend about $5,000 to $10,000 a year. At 3%, the same firm would spend about $15,000.
Professional liability is often the largest line for design firms. Firms with several vehicles often find auto close behind. Actual numbers depend on the firm, so treat any range as an observation, not a quote.
Why a design firm’s insurance bill can run high
A high total usually traces back to one line, not the whole program. Four causes come up most often.
Vehicles
Each insured vehicle can add more than owners expect. Ask whether every vehicle needs to be on the policy. If employees drive personal cars for work, hired and non-owned auto coverage may fit better than listing more vehicles.
Limits set by one client
One contract may ask for a high limit, and the whole firm then carries that limit all year. Some firms use project-specific or certificate-level solutions for a single project. Whether that works depends on the contract and the carrier.
A policy that was never re-marketed
A policy renewed for years with the same carrier may never have been compared against the market. Carrier appetite changes over time. A fresh comparison shows whether the current placement still fits.
Description of operations
The application describes what the firm does, and the carrier rates the policy from that description. A landscape architecture firm rated like a civil engineering firm is one example. A wrong description can raise the premium, so read yours carefully.
Why premiums creep up even with no claims
Premiums can rise without a claim, and several factors explain it. Carriers adjust rates as market conditions change. Revenue growth raises the exposure base for many policies. Auto and property costs have also climbed, which pushes those lines up.
Carrier appetite plays a role too. A carrier may tighten or loosen its view of a class of work from one year to the next. None of this points to a problem with your firm. It does mean the number deserves a look now and then.
The NAIC’s consumer resources offer general background on business insurance if you want to read further.
How to check your design firm insurance budget
Start by pulling every declarations page. The declarations page summarizes each policy’s limits, premium and policy period. Then work through four steps:
- List the premium for each line.
- Add the lines and divide by annual revenue.
- Compare each limit to what your contracts actually require.
- Ask your agent which line drives the total.
Start 90 to 120 days before renewal. That window leaves time to compare options and gather any documents the carriers ask for. A review two weeks before renewal leaves very little room.
Questions to ask your agent
These questions can start the conversation:
- Which policy is the biggest share of my bill, and why?
- Are my limits set by one contract?
- When was each policy last shopped?
- Is my firm described correctly on the application?
What we see at Hardcover
A small landscape architecture firm with no claims was paying roughly 3% of revenue for its full program. That program included professional liability, general liability, cyber and four vehicles. The owner told us they had never known what normal looks like.
The renewal was still five months away, which is the right time to look. Splitting the bill by policy showed where the total came from. Whether any change made sense depended on the firm’s contracts, vehicles and underwriting.
Related questions
How much should a small design firm spend on insurance?
Many small firms we see spend roughly 1% to 2% of revenue on the full program. Your number depends on state, claims, limits, vehicles and the work you do.
We have seen our insurance go up slowly over the years. Is that normal?
Gradual increases are common. Market rate changes, revenue growth and rising auto and property costs all push premiums up. A review can show which line is driving the increase.
Why does my insurance go up every year with no claims?
A claim-free record helps, but it does not freeze the rate. Carriers adjust pricing for the whole market. Your exposure may also grow as revenue grows.
What is the biggest driver of a small firm’s insurance bill?
It varies by firm. Professional liability is often the largest line. Firms with several vehicles often find auto close behind.
When should I review my insurance?
About 90 to 120 days before renewal, so there is time to compare options. Reviewing earlier gives you more room to gather documents and ask questions.
General education, not legal advice. Hardcover is an insurance agency, not a law firm.