Business insurance is one of the most important aspects of starting a company. Every small business owner needs insurance, but not all business insurance is created equal. While every business owner carries some type of liability, every business is different and with every business comes some degree of risk. Business insurance costs fluctuate, but they’re based on a few simple factors. Here are a few of the major factors that determine business insurance costs:
A company in a high-loss industry will pay higher business insurance costs. For instance, construction businesses or those who have employees in hazardous situations have above-average workers’ compensation and general liability losses, so they pay higher rates than a company whose employees are office-based.
Business insurance costs more when it covers more. So, the more coverage you opt for, the higher your rate goes. For example, a small, home-based business with $500,000 in liability coverage will pay substantially lower rates than a 50-employee business with $15 million in liability coverage.
Just as your homeowners and car insurance rates fluctuate between states, so does business insurance. If a business is located in an area that is considered high risk, their costs will be higher. A high risk area may be one that is prone to severe weather or high-crime rates.
The more you add to your cart, the bigger the bill. However, some of the optional coverage available might be worth it. For example, if you have employees travelling for business purposes or driving company vehicles, it might be worth it to look into options such as interruption insurance.
All rates of insurance increase with claims. When an individual makes an auto insurance claim, their rates will inevitably increase. If a business has a history of filing claims, it may be viewed as high-risk and charged a higher premium.
Understanding exactly how rates are calculated can help business owners to assess their options for insurance and plan for a necessary budget. Business owners should shop around for a more affordable policy through various brokers as well as online options. Comparing quotes is the best way to lower business insurance costs.
By Matt Reynolds - Google+