Small business insurance costs may make up a small fraction of a business’s overhead or it can be one of its biggest expenses depending on a variety of factors. Among the many factors that can affect the cost of your insurance premium is the industry or business you’re in, the value and type of assets and property owned by the business, number of employees, size of payroll and sometimes claims history. A small business insurance policy typically includes a number of different coverages, so it’s important to understand the things that affect the costs of the most common types of business insurance.
Cost Factors for General Liability Insurance
General liability insurance helps protect your business from liability in the form of property damage claims, bodily injury claims, and/or personal and advertising injury claims that could put your business’s assets at risk. For example, a customer may make a claim against your business if she slips on a wet floor in your store. General liability insurance can help cover the cost of that claim. The following factors contribute to the cost of your general liability premium.
Premises Size and Condition
The larger your business location, the more opportunities there are for claims to be made. This can increase your general liability premium costs. The condition of your property also plays an important role in determining the cost of your general liability policy. Newer buildings will often draw lower costs. This is because updated facilities are often safer and generally in better shape.
Insurance policy premiums are affected by the risk profile for your industry and your specific business operations. Typically, the more hazardous the industry, the higher the premium costs. Similarly, businesses that involve operating heavy machinery have a higher risk profile than that of an office.
Cost Factors for Workers’ Compensation Insurance
Workers' compensation provides benefits to employees for work-related injuries or illnesses including medical care, wages from lost work time, and more. This coverage is required in almost every state. The following factors affect the cost your business may pay for workers’ comp insurance.
As with general liability, your business industry greatly determines the cost of your workers’ comp premium. Businesses that are in more dangerous industries will often pay more.
Workers’ compensation pays benefits to employees based on a percentage of their salary. Because of this, payroll size greatly influences the cost of workers’ compensation insurance.
The claims history for a business may impact their WC premium. Businesses with few claims will often get a discount and those with more claims than are typical will have higher premiums. The logic being that if a business has few workers’ comp claims made against it, it is likely that the business operates more safely than similar businesses.
Cost Factors for Professional Liability Insurance
Professional liability helps protect your business if you are sued by a customer claiming a negligent act, error or omission in the professional services you provide. Professional liability insurance can help cover the costs related to the claim against your business. The following factors can affect the cost of your premiums.
Employment Status and Number of Employees
Usually, businesses with more employees pay higher premiums for professional liability insurance. Also, full-time employees cost more to insure. This is because they spend more time in the office and are therefore more likely to be a factor in a work related accident.
Businesses that offer expensive services or handle high value assets or sensitive information, typically pay more for professional liability. This is because of the greater potential for expensive claims. For example, financial institutions that handle million-dollar accounts will most likely pay more for professional liability coverage than a wedding photographer might.
Cost Factors for Commercial Auto Insurance
Commercial auto insurance helps cover the costs if you or your employees are involved in an accident while driving for work purposes. This coverage offers protection for more than just vehicle-on-vehicle accidents. It also helps cover the costs if you or an employee damages another person’s property or injures a pedestrian while driving. The following factors contribute to the costs of commercial auto insurance.
How and Where You Drive
In a nutshell, the more time you or your employees spend on the road, and the more hazards present on the roads that you’re traveling, the more you pay for commercial auto. Cities usually have more claims than rural areas. This is because there are more drivers, traffic, thefts and vandalism in cities. Businesses that do a lot of driving in urban areas typically pay more for commercial auto insurance.
Demographics play a large part in determining commercial auto premiums. For example, young male drivers are the most likely to be involved in a claim and can drive up premiums. Although demographics do contribute to cost, they have less of an impact when drivers are over the age of 25.
Type of Driving and Vehicle
Insurance rates differ depending on the type, make and model of the vehicle and this can affect your commercial auto premium. Typically, more expensive vehicles draw higher premium rates. Also, the type of cargo you transport can affect your commercial auto insurance costs. Transporting hazardous waste and other materials can also increase costs.
As with personal auto insurance, driving records can impact the cost of your premiums significantly. Insurance companies will consider the experience of the drivers covered under your commercial auto policy. A clean driving record is often a sign of good driving habits. The better your driving habits, the lower your commercial auto premiums may be.
How to Lower the Cost of Your Business Insurance
No matter the size of your business, one of the best ways to lower the cost of your business insurance is to be responsible and minimize the risks to and of your business. Work to reduce the likelihood of accidents at your work premises, on jobsites and on the road.
Consider changing your policy’s deductible amount. The deductible is the amount you pay out of pocket before the policy begins to pay out on a covered claim. Often, you can lower your premium costs by choosing a higher deductible amount.
You can also save money on your business insurance by bundling essential coverages into one policy. A business owner's policy (BOP) combines general liability, commercial property and business income insurance. Bundling the three coverages together can be more affordable than paying for them separately. It is also easier to manage a single policy than it is to manage three separate ones.
Small Business Insurance Costs
To find out how much small business insurance may cost you, get a quote today.