Any responsible business owner should consider getting commercial insurance for their company if they want to thrive and succeed for a long time. Businesses need business insurance as it helps cover the costs associated with property damage and liability claims. While taking out an insurance policy is a no-brainer for most entrepreneurs, some business owners are still concerned about the premium that you have to pay. Insurance companies use many factors when calculating your premium, including claims history and the risk associated with your business. So, if you’re curious about how much a typical commercial insurance policy costs, let’s go over some of these factors one by one.
Factor #1: Industry
Business insurance premiums wildly vary depending on the industry you’re in. It all has something to do with the risks involved in certain types of jobs and businesses. Each industry has its own inherent level of risk, which is basically the most significant driver when it comes to calculating your insurance costs. To put it simply, a construction company is open to a lot more risks than a web design agency, so it only makes sense that the former’s insurance premiums are a lot higher than the latter.
Factor #2: Level of Expertise
If you’re an entrepreneur with little to no experience in managing a business, then that has a significant impact on your insurance premiums. On the other hand, if you’re a business owner who spent years or even decades to hone and perfect your skills, insurance companies will presume that you have a lower risk than those who are just starting out.
Don’t be surprised if your insurance agent asks for details about how long you’ve been in business, your educational background, and even the qualifications of your employees. All these will be considered and will eventually impact how much premiums you’re going to get if you applied for commercial insurance.
Factor #3: Annual Revenue
Managing a profitable business is such a rewarding experience. If you’re like most business owners, you’re probably doing everything in your power to increase your revenue each year, which is a good thing. Growing your business is all part of the process. However, you should also remember that a growing business will cause your insurance costs to grow, too. Most insurers look at higher revenue to result in more customers, more employees, or even a bigger establishment or office. All these factors actually increase your risk. Basically, the bigger your business is, the more moving parts it has, the higher the chances of things going wrong. As much as we don’t want that to happen, things do go wrong, even in businesses. If you get sued, your insurance carrier would want to know how much you would be held liable for. This is mainly why insurance premiums also go up as you grow your business.
Factor #4: Employees
As mentioned above, insurers are very much likely to ask you about your employees and for a good reason. In general, the more employees you have, the more you’ll pay for insurance costs. This is especially true with general liability or workers’ compensation insurance, as they focus more on the risks associated with your employees. Also, even their qualifications are being considered by the insurer.
Conclusion
Commercial insurance might not be as fun as other parts of planning a business, but it’s a crucial part of managing a legitimate business. Seeing these factors, business owners have a lot to consider before getting an insurance policy for their business, but that doesn’t mean you shouldn’t get one. It just shows how much value business insurance adds to your company and the kind of protection it provides.
Quesurance Group® is an agency offering a variety of policies and products designed to help individuals and businesses protect what they value the most. We are in the business of helping people, businesses, and the entire community. Whenever you need auto, home, flood, commercial insurance, or other products, Quesurance Group® is here to help. Contact us today to learn more about our insurance policies.
