The odds of potential loss in a business depends on quite a few variables, but in most cases, the odds against at least some form of financial loss isn’t in the favor of a business owner, and certainly not worth taking the chance without some from of liability protection. Business insurance is one of those crucial means of protection that enables a business to cope and continue to thrive during financial losses that may occur in the future.
Calculating insurance rates can depend on a number of factors, as well as the different rates offered by the various companies themselves. Business insurance rate calculations are based on rating formulas that can range from simple to complex. Insurance agents will almost always ask for detailed information, so it’s important to have this information on hand.
Some factors used to calculate rates that companies use might include:
• Amount of coverage -- excess coverage obviously equates to higher risk of coverage for the insurance company, which typically results in higher rates to offset the higher risk factor.
• Claims history -- often assures a business will be offered cheap rates if they don’t have a history of frequently filing claims.
• Location -- rates will increase in high risk locations, which can include areas that have high crime rates or where severe weather is more frequent.
• Insurance companies -- rates will often vary between different companies, in many cases for the exact same coverage.
• Deductible amount -- rates will fluctuate between higher or lower deductibles.
Other factors that affect business insurance rates can include the type of business (whether it’s distribution, customer services, manufacturing, etc.), the date of the buildings construction, number of employees, payroll figures and sales figures. Square footage of the business location, square footage of the business itself, total square footage of the ground floor if located in a multi-story building and total square footage of the customer area is another major factor.
If the business is primarily in manufacturing or distribution, sales figures will probably be used to calculate rates. If the business provides professional services, such as law firms, medical facilities or engineering firms, square footage will probably be one of the primary factors that are considered. Statistics show that general liability, such as accidents to clients on the premises, is one of the most significant risks to professional businesses. Obviously, the greater the square footage accessible to clients increases the chances of general liability risk to the business.
Given these variables that are used in calculating business liability policies, it’s not only important for the business owner to know what policies will best suit their business, but shop around so that they can get a good feel for the variety of options available. The cheapest and fastest way to go about this is to get as many quotes online as possible. Many sites, including big name insurers, offer multiple quotes for free.
It’s important for the owner to get the information about their business as accurate as possible. It’s also important to keep the important aspects listed above in mind when comparing policies. That way the owner will protect themselves and their business with all the right business insurance they need without any additional costs for coverage they don’t need.
By Andre Bradley