Nowadays, having insurance is one of the most popular investments. As the risks of running a business become higher, the more reason why you should get business insurance. However, getting business insurance is always challenging. You must allot some time, money, and effort to find the best insurance for your business.
One of the most crucial parts of getting business insurance is the rates. Although it’s a great investment, you should still look out for the factors that can influence the rates as they can significantly affect your future financial needs. If you want to know about these factors, this article will discuss them to help you make informed decisions.
1. Industry and Niche
Different businesses face different risks. So, one of the things you should think about when getting business insurance is the industry of your business. For instance, if you own a factory, your business has higher risks compared to a convenience store franchise. In this case, you need higher claims in case of unexpected situations. So, if you own a business with high risks, it’s recommended to be prepared for a bigger amount of premiums.
2. Business Size and Revenue
The business size and revenue also tend to be one of the biggest factors considered when getting business insurance. Since there’s a bigger property to protect and higher revenue to keep safe from damages and theft, the higher your investments should be.
When you opt for business insurance that covers your business size and revenue, you can guarantee higher claims.
3. Location
Another thing that’s usually being considered is the location. If your business is located in a disaster-prone area, you also need to higher premiums. Even if your store, office, or factory isn’t a large one, the threat of being in a disaster-prone area is always there which can cause the loss of your properties, tools, and equipment.
Luckily, if you don’t own the property, you can focus on ensuring other things that belong to you. But if you do own the property, you need higher premiums to secure it.
4. Claims History
How’s your claims history? If you’ve previously filed for large claims, whether it’s from the same insurance provider or not, it can affect your current business insurance premiums. Aside from the value of claims, the frequency of the claims you’ve filed can also have a great effect on the premium rates. Besides, if you often file for large claims, it means your business is high risk, which requires you to get higher premiums.
5. Coverage Type and Amount
Aside from the potential risks to your business you also need to consider the types of coverage your business needs. Some of the most popular business insurance coverage includes liability, compensation, commercial property, commercial vehicle, and others based on the nature of your business. The more coverage you get, the higher premiums you need. Additionally, it’s not recommended to get the basic coverage, so look out for the coverage amount that can cover your claim if ever you need to.
6. Employee Size and Payroll
How many employees do you have, and what’s the total amount of your payroll? It may be a simple question, but it can also add up to the premium you need for your business. Besides, sometimes, the size of a business can be big, but the employees can only be a few. Meanwhile, when talking about the employee count, it’s when the employee compensation coverage is being considered.
7. Risk Management Practises
Aside from getting business insurance, businesses should also have additional risk management practices depending on their niche. Some of these practices include installing security cameras, availing of computer viruses, and arranging regular safety training for employees.
If you implement various risk management practices, they can also help lower the rate of your insurance premiums since you’re making sure you’re safe from the risks around your business/ On the other hand, the more exposed you are to various risks, the higher the chance that you can’t escape the higher business insurance rates.
8. Policy Deductibles
The policy in terms of the deductibles varies from one insurance provider to another. They can give you various choices on how you want your deductibles to be settled, but it’s mostly based on your decision.
The policy deductibles are the amount you pay out of pocket before your insurance claim gets implemented. If you’re willing to pay for higher deductibles, your insurance premium is lower since you’re willing to pay for a higher amount in the event of a claim.
On the other hand, if you wish for lower deductibles or none at all, this means your premiums are higher.
9. Business Stability
The more established and experienced businesses are, the lower the premiums offered to them. This is because they’re more stable, and there’s a lower chance that they encounter unexpected situations resulting in filing for claims.
Meanwhile, SMEs and start-ups are still establishing their brands, and have higher chances of encountering risks, so higher premiums are offered to them.
Final Thoughts
Knowing and understanding the factors influencing business insurance rates is important to make informed decisions. Once you’re aware of these factors, you can tighten the security of your business and help you implement other risk management practices. In the long run, getting business insurance can help your business achieve its goals.
