Business Insurance, also called Commercial Insurance, is insurance that covers your business and everything it does. Since there are many different types of businesses and industries, there are many different types of business insurance policies. The scope of this article is to focus on what affects Commercial insurance premiums and what you can do about it.
Commercial Insurance rates are based on a number of factors but the most important one is Revenue. Why revenue, you might ask? The answer is pretty simple. The more business that you do, the more interactions that you have, the more revenue that you earn, the greater your risk. If you are building one house vs. one hundred houses, there is a great difference in risk and things that can go wrong. The same holds true across almost every industry you can think of.
How to calculate commercial insurance premiums often varies by insurance company, but the rule of thumb would be to charge a rate per $1000 of revenue. For example, an insurer might charge $2 premium for every $1000 of revenue. Statistically, if your business is one or two people and it earns less than $500k per year, you can expect commercial insurance rates in the $1000 range per year. The lowest you’ll see for any commercial insurance policy might be around $500 to $600 per year.
Of course, most of this is packaged up on your policy and not broken out like we have done here! Want a quick quote to see how much commercial insurance would cost for you?
Other factors in determining price can be number of employees, number of years you have been in business, prior claim history, whether or not you do business in the U.S. and how well your building is secured and updated.
Depending on your business and what you need covered, you can buy coverage for things like Commercial General Liability, Stock and Equipment, Business Interruption, Errors and Omissions, Crime, Fidelity and many others.
We will cover these more in depth in another article. For now, what you need to know is the more coverage you buy, the more it will cost. Unlike personal insurance where you are generally covered for anything under one policy, you can purchase many different types of business insurance depending on how much risk you have and how well you want to be covered.
Most small businesses like Contractors, Retail stores or Real Estate need what’s called Commercial General Liability, or CGL for short. If you are doing a job for someone or renting a space and your client asks for a Liability Certificate, this is what they mean. A Commercial General Liability policy gives you coverage for third party liability and a certificate is proof of insurance, just like the pink card you have in your car. Other businesses such as professional consultants, agents, brokers, lawyers, etc usually need some Errors and Omission coverage in addition to a CGL.
There are several sure fire ways to reduce commercial insurance premiums. Having a track record of being in business with no claims is a great start. Having an office or location in a building which is newer, with fully updated heating, electrical and sprinklers helps. Having a monitored alarm system helps.
Overall though, probably the best way to reduce your premiums is to shop around. Business insurance rates can vary drastically from one company to another. Our advice, if you are a small business and are paying under $1000 per year you probably have more important things to do with your time than trying to save $100 on your insurance. However, if you are paying thousands or tens of thousands per year you might want to shop around once in a while. Your savings could be substantial.
As always when shopping for insurance, especially business insurance, price should not be the primary factor. You should always make sure you have the proper coverage for your business first. You do however want to make sure you are paying a competitive price and not leaving any money on the table.
You can use our quick quoter now to get an estimate. Begin Insurance has a team of experts who can help you wade through which coverage you need for your particular business. Feel free to contact us anytime also!