If you are brand new in business you may or may not have already experienced the sticker shock of purchasing liability, business property, worker’s compensation or other business insurance. If you have been in business for a while you are aware that a significant part of your annual budget goes to those pieces of paper we call insurance. Many factors that go into the cost of insurance can not be controlled by the small business owner. However there are also things you can do to help your insurance rates improve.
Some things you can NOT control:
1) Length of time in business. Brand new start-ups are going to be considered higher risk than a business with a history, run by someone with experience. Make sure your agent knows if you are starting a business if you have relevant experience. This may help them place the coverage easier however until there is an insurance history to go by, the rate will most likely be higher.
2) Type of business you are in. If you are a roofer you are going to be paying more for your liability and worker’s comp (if you enough employees to require carrying) than someone planting flowers. A restaurant owner will pay more for the insurance on their building than a business owner with an office exposure. Again this is because the likelihood of loss is greater for certain professions.
3) How much insurance required for a contracted job. You may be comfortable with carrying $300,000 per occurrence in liability but if you decide to contract to do work for a company that requires $1,000,000 in liability you will need to increase your policy. Even if you have high enough liability already in place you may be required to name the company you are working for as an additional insured. This typically will be an additional charge on your policy because literally you are asking your insurance carrier to cover both you and the other guy. Sometimes the company you are contracting with will also expect you to have policies you previously had not carried because you weren’t otherwise obligated to do so (work comp for a one “man” business, pollution liability, and others). Best advice is to contact your insurance agent to review the contract insurance requirements BEFORE you sign the dotted line.
Some things you CAN control:
1) Keeping yourself insured. Once you get a business policy, pay it on time and renew it continually because that can help with getting the best premiums and obtaining discounts. A gap in coverage affects how the company sees your possibility for risk and poor pay history can also prevent rates from improving with time.
2) Practice the best safety precautions in your profession to prevent claims. Many insurance carriers can assist with developing safety manuals specific to your industry or may offer inspections to help mitigate potential hazards. Train employees in safety precautions. Keep all of your equipment in the best shape to prevent injury to employees or damage to the job site. Being claim free or filing very few claims over time is the most important factor in obtaining the best premiums for your business insurance.
3) Make sure your place of business in great shape. If you are leasing a location try to pick one that is newer construction or at least has been fully updated electrically, roof, and plumbing. Find a building that has safety features like fire extinguishers, sprinkler system, fire and burglar alarms or have them installed before you occupy. Even if an insurance carrier is not insuring the building they will likely give preferred rates or discounts for safety features and modernization. The insurance carrier may also require adding safety features like lighted EXIT signs or handrails on stairs if these don’t currently exist in the building so watch for potential issues before leasing a location.
4) Deductibles. Ask for the highest deductibles on property insurance (for your business building or business personal property) you can afford. A higher deductible will prevent you from filing a smaller loss but in return your premium savings could be worthwhile.
5) Multi-policy discounts. Try and get all of your business insurance with the same carrier and you could see some definite discounts. Your insurance may qualify to be packaged which can help with premiums and also can include extra coverages for no charge.
Notice that there are more things you can control than things you can’t? You also should find an insurance agent that you know is savvy enough to find every way they can to help you save money on your insurance. Depending on your business or locale there could be additional measures that are in your control to reduce your premium. The key however is realizing a good insurance agent is also not going to sacrifice protecting your business just to save you a few bucks up front. You simply can’t buy more insurance AFTER a loss if you didn’t have enough at the time of the loss.
Insurance is an unavoidable expense for a business. Some aspects of the insurance costs are beyond the control of the business owner. However lots of factors affect your premium so help yourself by using the things you can control to qualify for better rates.