Small Business Insurance: What Affects Your Rates?
Every business needs insurance to help cover property loss due to disaster, theft, or vandalism. They also need insurance to cover liabilities, lawsuits, and business assets in case of accounting mistakes or employee errors. Small businesses need to keep careful track of expenses in order to succeed. Here are some things can affect how much your insurance will cost.
1. The size of your business.
Not all small businesses are the same size. Your business might just be you, or it could be you and thirty employees. The more people you hire and the larger your enterprise becomes, the more it will cost to insure. Each employee will need to be covered for worker's compensation and liability for things like sexual harassment and unlawful firing. This is why it is essential for business owners to review their insurance coverage often to make sure it is still adequate.
As your company becomes wealthier, your insurance rates will also increase. The bigger the profit, the more you've got to lose in the case of a lawsuit or cyber attack.
2. The type of business service you provide.
Some businesses have a higher risk than others. For example, if you are in business making custom stationary and wedding invitations, it's probably less likely that you could be sued for personal injury or that someone will target your business for theft.
On the other hand, if you have a business repairing and selling computers and phones, your inventory is worth more and will cost more to insure. If you have a small physical therapy practice, you might need increased liability insurance since the risk of injury to clients is greater and because you might handle sensitive personal and medical information.
3. Where your business is located.
Location, location, location. It's not just important for getting the right business traffic and exposure. It's also important for keeping your insurance rates down. Opening a business on the rough side of town might mean lower rent or real estate costs, but it could cost you more in insurance because crime rates are higher and small businesses get targeted more.
Opening a business in a small town instead of a large metropolis might cost you less. Rural areas have fewer accidents and crimes. You'll need to visit with a loss consultant to analyze your business success versus the location to see which location will end up saving you money while still allowing your business to thrive.
4. The connections you have with other businesses.
Most businesses need what is called "errors and omissions" coverage for their business. It's a type of liability coverage that helps to protect you if you do not fully meet professional requirement with other people and businesses you deal with. Usually, errors and omissions helps to prevent trouble with honest mistakes that still cause harm.
For example, if you provide wedding invitations for a Harry Potter themed wedding and use a logo from one of the movies that is protected by copyright without realizing it, the errors and omissions insurance would help to protect you in case someone were to sue for copyright infringement.
Contract mistakes, lack of correct interpretation, bad software, computer viruses, or even mistakes made by independent contractors might be covered by errors and omissions insurance. The more connections you have with other businesses and the type of business you provide affects your risk for making these mistakes, which in tun affects your rates.
5. The number of claims you have made and your history with insurance in the past.
Several past claims, a history of lawsuits, or trouble handling client and customer information can mean increased rates for the present time, so the number of business insurance claims matters as well.
Your business is your livelihood, so you should consider all aspects of insurance and review your policy with an agent frequently.