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As a business owner, you rely on insurance to protect your company against a multitude of perils. From property damage to personal and professional injury claims, you depend on your insurer to cover the related costs of such actions. Without this coverage, you risk losing everything you have worked so hard to create, but with increasing premiums, you may wonder if it is still worth paying for your policy.
So, what’s driving up your insurance costs, and how can you bring them back down? Three things usually behind a sudden rate hike that you may not have realized impact your pricing.
1. Your Business Location
Surprisingly enough, your zip code directly impacts how much your business insurance will cost. This is because underwriters for your insurer take in many factors when assessing what to charge for coverage. For example, if you operate in an area with frequent burglaries.
Another aspect of your location is the business space you are using. For example, do you own your commercial property or rent a storefront in a shopping mall? How old are your facilities, and is there a history of fire safety or zoning violations in the past? These aspects of where you conduct business factor into your premium calculations.
2. The Business You Conduct
The type of business you conduct will bear a significant impact on your commercial insurance costs as well. For example, suppose you run a restaurant. In that case, there are more significant fire risks, employee injuries, food and liquor violations, and other perils than an accountant face daily.
Some of the highest general liability rates fall in construction, manufacturing, and janitorial industries. This is since these businesses frequently work on their clients’ properties, which carries a higher damage potential.
3. Previous Commercial Claims History
If you have any past insurance claims, your insurer will consider these when determining your rate. Even instances where you prevailed in court will still count against you since the money had to be paid for your company’s defense. Employees who have caused company vehicle and equipment accidents may also reflect your hiring decisions. These aspects will be evaluated to determine if you have increased risk trends.
How to Lower Your Business Insurance Costs
Now that you understand the core factors that can make your business insurance premiums go sky-high, there are ways you can reduce your rates.
Bundle Your Coverages
One great way to save on insurance is to bundle your coverages into a single policy. This is also known as purchasing a package policy. Many insurers offer small businesses a business owners policy (BOP). This option typically includes the following at a discounted rate:
- General Liability
- Commercial Property Insurance
- Business Interruption Protection
Numerous other commercial coverages, such as commercial auto and criminal coverages, can be included as a component of a bundle package in addition to liability and property coverage.
You might be able to secure further savings if you add additional policies for professional liability and commercial auto.
Avoid Over Insuring
When you purchase business insurance, the goal for your coverage is to restore your company to its previous financial state before a loss. If your protections go beyond this standard, you might be paying for policy options you’ll never use. Removing them could save you significant money each year.
Furthermore, even though the majority of commercial policies don’t overlap with other types of insurance, they occasionally do. By looking over your policies for duplicate coverages and removing the overlap, you can reduce the cost of your insurance.
Take a Higher Deductible
Choosing your upfront out-of-pocket costs when insuring your business is a challenge many new companies face. Your deductible amount has a direct impact on your monthly premium. If you choose a low amount, then your rate is high. However, if you change to a higher deductible, you could save on your insurance payments.
Be cautious when changing deductibles on your liability policies. You should only choose an amount you know is affordable if an accident or business loss occurs since you will have to pay it for your policy to kick in. What seems like smart money savings could turn into a financial nightmare if you can’t afford to pay your share of a claim’s deductible.
Don’t Miscategorize Your Employees
You will have to carry workers’ comp coverage whenever you hire employees. But, your premium is partly impacted by their industry classification. Therefore, it is important to accurately classify your staff to ensure you pay the correct insurance costs, and you might discover your inaccuracy was costing you hundreds in extra expenses. Likewise, keeping employee work statuses up-to-date when they join or leave your company can also ensure you pay the correct rate each month.
Therefore, it is critical to make sure your company is categorized appropriately since incorrect categorization could affect the rates you pay for workers’ compensation insurance. If you believe the classifications indicated on your policy are wrong, get in touch with your agent or insurer.
Advanced Premium Payments
For some businesses, choosing a higher deductible is not an option to save on monthly premium costs. Many businesses prefer to pay the cost in monthly or quarterly installments rather than all at once because insurance can be a significant investment. On the other hand, insurers prefer to collect the entire premium at the time the insurance is issued. As a result, some companies might give policyholders who pay the entire amount up front a discount or another perk..
Shop Different Carriers
If, after all of these suggestions, you can’t get your insurer to cut you a break on your business insurance policy, it may be time to shop around. Different insurance companies offer various specialized options based on your industry; some even specialize in only insuring select business types. This could work to your advantage, and you might find a better deal.
Take time to learn about the costs online so you can get an idea of who to call first. Also, list your current coverages so you can get an apples-to-apples quote.
