Insurance is a necessity for the survival of your business, but that doesn’t mean you need to overpay for coverage. You can protect your business assets from the threat of lawsuits, claims, and losses with affordable insurance policies, while freeing up the cash you need to keep your business operational.
How Are Business Insurance Costs Calculated?
Before we discuss ways to save, here’s what you need to know about how your insurance prices are calculated to start with. Your insurance costs are determined by a variety of factors, including:
- Claims History
How to Pay Less for Your Business Insurance
While some of your insurance cost factors can’t reasonably be changed, you do have control over the most important: your claims history.
#1. Reduce and Avoid Claims with Risk Management
Your business is never too small, too new, or even too established to focus on risk management. You don’t have to have an entire risk management department or huge resources at hand, either.
The basic principles of risk management include identifying potential areas of risk for your business, and taking steps to reduce the chance of them happening.
For instance, you may walk the floor of your retail establishment specifically looking for potential dangers to customers and employees. Make a note of all product displays that look unstable, or areas that need to be cleaned to prevent slip and falls, and then immediately take action to improve the safety of your establishment.
Physical injury dangers aren’t the only areas of potential risks for business owners, either.
- Are you protecting confidential client information to reduce the risk of identity theft or data breaches?
- Are your delivery drivers required to maintain a clean driving record or any special licenses?
- Do you have measures in place to reduce internal theft or fraud?
If you’ve been in business for a while without an official risk management process, it’s never too late to start. And if you are just beginning your business venture, start with a focus on reducing and avoiding incidents that could cause a loss to your company and result in an insurance claim.
#2: Create a Safety-Conscious Company Culture
Some industries are naturally more dangerous than others. Construction and manufacturing workers, for example, face a higher risk of physical injury while doing their jobs compared to office workers. But every business can benefit from making safety a company-wide priority.
Workers’ comp claims occur when an employee is injured or becomes ill due to performing their job and needs medical care or lost wages for time off to recover. A single claim can increase your workers’ comp premiums for up to three years.
Making safety a priority in your company is essential.
- Develop an Illness and Injury Prevention program.
- Ensure that supervisors and employees receive appropriate safety training.
- Include safety as a component of annual reviews.
- Develop an accident-response protocol.
Making every effort to avoid an insurance claim is the best way to reduce your business insurance costs. But it’s not your only option. Here are a few other ways to save.
#3: Pay Premiums Upfront
Your insurance premiums can typically be paid monthly or annually. A smaller monthly payment may look more appealing, but generally you can get a discount for paying the entire premium in full up front.
Another benefit to paying your premiums upfront is not having to worry about missed payments. If you miss a payment on your insurance policies, you may run the risk of a cancellation for non-payment of your premium. Cancelled policies and coverage lapses can end up costing you even more in the future, so maintaining coverage is key to keeping costs low. When you pay your premiums in full, you won’t have to worry about the consequences of a missed payment (intentional or not) later in the year.
#4: Purchase a Package Policy
It may be tempting to shop all over town for the best rate on one policy and then another, but generally you can save on your business insurance when you combine multiple policies with one single provider.
Small to mid-sized businesses may financially benefit from a package policy, such as a Business Owner’s Policy (BOP). BOPs are typically available for businesses with fewer than 100 employees and annual revenues of $5 million or less. BOPs are single prepackaged policies that provide affordable coverage against the most common risks, such as fire, burglary, liability, and business interruption losses.
#5: Keep Your Insurance Agent in the Loop
Your insurance professional can do more than just write or renew your policies for you. Consistent communication with your agent/ broker can be invaluable. Your insurance professional can provide advice that can help you avoid claims and disasters.
Keeping your agent informed about major purchases and changes to your business can also help keep your policies and premiums up-to-date. Your rates may change if you’ve bought or sold equipment, hired or fired employees, or changed business operations. Keeping your agent informed will ensure you’ve always got the right coverage at the right premiums for your business.
Business insurance is crucial, but you can get adequate coverage at affordable rates. Taking action to avoid claims can go a long way toward lowering your insurance costs. Working with your agent can also lower your costs as you find even more ways for your individual business to save.