A small business insurance policy doesn’t need to be expensive. The exact price you’ll pay depends on a number of factors, including:
- Your business operations (high-risk vs. low-risk operations).
- What type of coverage you buy.
- The insurance provider you choose.
- How much you’re willing to pay out of pocket after an accident or mistake.
NEXT shares what goes into what most small businesses pay for business insurance and how companies can save.
What Affects The Cost Of Business Insurance For A Small Business?
Small business owners’ insurance is often made up of different policies that provide protection for different risks.
You might decide to buy a combination of general liability coverage, commercial property insurance and workers’ compensation insurance to protect your business and meet state or local requirements.
If you buy more types of coverage, you could have higher insurance costs, also known as higher premiums.
Your coverage limits (or policy limits) could also affect your cost, including:
- The per claim limit — The maximum amount for each insurance claim.
- The aggregate limit — Your maximum annual payout for a policy.
Finally, your deductible (the amount you pay before your insurance policy kicks in) can also be a factor in how much you pay.
What Factors Impact The Cost Of Your Business Insurance Premium?
Several factors impact the cost of business insurance premiums. These might include:
- Type of business
- Industry
- Business structure (sole proprietor, LLCs, corporations)
- Business location
- Size
- Revenue or business income
- Payroll
- Claims history
- Coverage limits and deductibles chosen
- Level of risk in business operations and activities
- Number of employees
- Value of assets being insured
- Type of vehicle you drive
- Driving record
A lot of factors, right? Insurance companies also consider external factors like economic conditions and market trends to determine the cost of annual premiums.
How Can You Save Money On Business Insurance?
These four tips can help reduce your small business insurance costs.
1. Bundle More Than One Policy
Small business insurance comes in many forms.
Many businesses purchase a combination of these types of coverage for protection from different risks:
- General liability coverage helps cover costs if you or an employee accidentally damages someone else’s property, or medical expenses if someone other than an employee gets hurt as a result of your work (also known as bodily injury).
- Commercial property insurance helps protect the equipment, inventory and physical property you use for your business. It can also include business income insurance.
- BOP insurance (business owner’s policy) combines general liability and commercial property coverage into one, often more cost-effective, policy.
- Workers’ comp insurance is required in most states for employers or if you have employees. It can help cover work-related illness or injury.
- Professional liability coverage, also called errors and omissions (E&O) insurance,can help cover professional mistakes that cost a client money.
2. Lower Your Risk Level
A safety and training plan can help prevent accidents — and accidents might increase your insurance premium. What’s the best way to lower your risk?
- Make sure you and your employees are properly trained.
- Focus on work that you know how to do.
- Don’t do jobs you’re not trained to do.
- Make sure you have coverage for the work that you do.
- Keep your business or job site secure.
- Keep your business and work area clean so no one trips on cords, furniture, equipment or tools.
- Take steps to mitigate property damage and injuries from rain, wind, snow and inclement weather.
3. Learn From Your Previous Claims History
Analyze your previous claims history and figure out what you could have done to avoid those risks.
4. Pick The Right Limits And Deductible
Lower limits will save you money, but you’ll have a higher risk of financial loss if you don’t have enough business insurance coverage.
If you choose a higher deductible, you could pay less for the policy.
This story was produced by NEXT and reviewed and distributed by Stacker. It was written by Karen Solomon for NEXT.
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