How much does business insurance cost? Factors that influence how much you'll pay

1036

 Not sure how much to expect to pay for business insurance? This article explores the factors that influence the cost of the most common policies of business insurance. Keep reading below to find out! 

If you’re still on the fence on whether your business needs insurance or not, find out that the correct answer is that you do need it for a number of reasons. Think about it: owning your own company is a dream come true that you’ve worked really hard for. So, you probably wouldn’t want it to see it falling apart because you neglected looking for a cheap business insurance quote to protect it from an unexpected event. Without business insurance, you may have to pay out of your own pocket for potential costly damages or legal claims against your company. And, this can definitely mess with your company’s financial wellbeing.  

As a business owner, once you realize the importance of having business insurance, you may be tempted to choose the cheapest option you can find. Yet, this is not always the best decision if you fail to understand what your business insurance needs are. For example, when it comes to commercial car insurance, you may have to decide between bobtail insurance vs non trucking liability insurance. And, the only way to make the right decision is to understand how you’re planning to use the vehicle in the future. 

But your particular business insurance needs are not the only factors influencing how much you should expect to pay for the policy. The costs of business insurance policies can vary a lot for one business to another, depending on a number of factors. Here’s what insurance providers take into consideration when giving you a quote: 

Image source: unsplash

The industry you’re doing business in

This one is perhaps the most important factor that insurance providers consider for the cost of your policy. Why the industry you’re doing business in matters? Because each industry has its own level of risk when it comes to certain unexpected events that could cost money to fix, especially when it comes to policies like Workers; Compensation.  

In other words, the riskier the industry you’re in, the more you’ll pay for a business insurance policy. For example, companies in the construction and manufacturing industries are open to a lot more risks than an accounting office. 

So, it’s possible that the insurance agent will start your conversation by asking in which industry you do business. 

Where your business is located

Insurance policies can cost differently for similar businesses that are located in different areas. That is why because one location can increase the risks for a business that the other company may not be exposed to. 

For example, if your business is located in a location prone to flooding, wildfires, or other types of risks, it’s very likely that the insurance agent will present you with a higher price. 

Bottom line, if you think about it, moving your business to a safer location can be a strategy to save on business insurance policy costs if that’s what you’re after. 

How educated and experienced you are

As weird as it may sound, it is very probable that the insurance agent will take your level of expertise into consideration before making you an offer. Why this happens is because it is believed that educated business owners have the skills and knowledge to avoid certain unplanned bad events. 

In other words, your experience in business and your type of education can tell the insurance provider that they are assuming a lower risk by insuring your business. 

So, don’t be surprised if you’ll be asked about your education and experience in the field. 

How many people work for you

How many people work for you will also influence the final price you’re given by the insurance company, especially if you’re asking for general liability, error and omissions, and workers’ compensation policies. 

As a general rule, the more employees you have, the higher the insurance costs. It’s not rocket science to understand why. For example, say you’re asking for a workers’ compensation policy. In that case, the number of your employees can determine how much the insurance company would have to pay in the event of an accident. Obviously, the more people work in your company, the higher the chances someone can suffer an injury or accident and ask for workers’ compensation

How much your business makes annually

As every business owner out there, you’re probably constantly looking for ways to increase your business’s annual revenue. Yet, find out that by doing so, you may increase the cost of business insurance for your company. 

Insurance companies put it this way: the more significant the revenue, the more employees/ customers/ square footage, which all lead to increased risks. 

Your claim history

Unsurprisingly, insurance companies will also check your past claim history to see if you have any and what you did about it if they do find something. And, it’s easy to understand why they do so. 

Think about it: if over time, your business has been sued several times for a faulty product or a mistake in the way you’re providing your services, that’s a sign that the risk for it to happen again is pretty high. If there are numerous claims there, it basically means that you didn’t do anything to fix the mistake and avoid a future potential case. 

The same goes if more than once, one of your workers has suffered an injury or accident caused by the same mistake. If the same story has been repeated more than once, it will likely continue to do so. 

The type of business insurance you need

The type of policy you want to ensure your business also dictates how much you’re going to pay. The more policies you want to add to your plan, such as commercial auto insurance, workers’ compensation insurance, commercial property insurance, and so on, the higher the final price of your business insurance.