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Factors that affect how much you will pay for your Business Insurance

As a business owner, you know how important it is to protect your company with the right insurance coverage. However, the insurance industry is confusing and mysterious for many people. A business insurance, also called Commercial Insurance, is insurance that covers your business and everything it does. As there are many different types of businesses and industries, there are many different types of business insurance policies.

As a small business owner, one of the things that should be included in your budget is the cost of your insurance premium. Although, this can be tough because, unlike many overheads, business insurance premiums are not a fixed or easily calculable cost. The cost of insurance can vary from business to business and is determined on an individual and specific business industry basis. There are no general pricing rules.

One of the frequently asked questions is how an insurance company calculates a business’s insurance rates. There are many factors that can affect the cost of your commercial insurance. From the size of your business to your industry, the circumstances can differ greatly. To simplify, you can assume that the riskier your business is, the higher your insurance costs will be, though it can be minimized with help of an expert insurance broker.

Most people know that insurance premiums are not stable and can rise and fall, but the question is why do your premiums change? What factors play a part in the amount of money you pay to your insurance company to increase or decrease? The scope of this article is to focus on what affects Commercial insurance premiums. Here we have outlined a few of the biggest cost culprits, but of course, speaking to an insurance broker will help you if you want to lower your insurance costs.

Type of policy:

The kind of business insurance policy you have affects your insurance costs. Different insurance policies have varying costs, the type of policy you purchase will affect your premiums. Most organizations need multiple types of insurance solutions. And the price for those insurance solutions can vary dramatically. Although, you can offset some of the costs of these policy premiums by bundling your insurance. Accumulating your coverage in a BOP (business owner’s policy) is a smart way to save some money while still getting the coverage you need.  For example, a standard Business Owner’s Policy (BOP) packs together the commercial property, general liability, as well as the business interruption insurance. This allows you to save money as it can be cheaper to pay for the BOP premium than paying for three individual premiums.

Industry and risks:

Certain occupations can be riskier than others. One of the major factors that affect your premium rate is the likelihood of it being paid out, as well as how high the liability would be in the case of a pay-out. With that in mind, some industries tend to carry more inherent risks than others and therefore have a more substantial premium. For example, a construction or a demolition company that is handling dangerous equipment or has a lot of potential hazards is expected to see a higher insurance cost and premium compared to an accounting company with less risks. So, if you own a construction or a petrol station business, the likeability of you paying more for insurance is higher because of its high-risk potentials. But this higher cost ensures that your business is covered in times of crisis. The amount of risks the insurer takes by delivering you an insurance policy will affect the coverage that is offered. In general, the higher the coverage provided by the insurers, the higher the premiums, but this does not always apply, so it pays to talk to an experienced broker about your coverage options.

Number of claims filed/history:

Insurance companies are big believers in the saying, “Where there’s smoke, there’s usually fire.” If the type of industry your business is included is notorious for high liability means that it has a higher risk of potential claims. All insurance companies will most likely look at your past claim history unless your business is new. For example, if you have had prior claims for machinery breakdown, an insurer may charge higher premiums for your machinery section than if there have been no previous breakdown claims. So, it is possible that your premium can be higher than others, but it allows you the peace of mind when problems arise.

Shopping around for the right insurance is the best way to ensure you get the best price for all your business coverage needs. Our experienced insurance brokers know how to deal with insurance providers to find you the right policy and stay on track with the changes so that your premium remains at its lowest.