04 Mar 2021
Factors Affecting Business Insurance

As a business owner, you want to ensure that you’re getting the best policy at the best rate for all your coverage needs. Protecting your business assets and liabilities is important to avoid significant losses. However, there is no one-fits-all price for commercial insurance as your premium rates will depend on your specific situation.

The following are the 3 important factors that affect business insurance costs.

1. Property Value

Insurance providers determine the property value of a business per hundreds or per thousands of dollars of the insured limit. The higher the value, the more the risk of losses for the provider; hence, the estimated worth of your business’s property assets would determine your premium rate.

Here are some of the factors that are considered to estimate the value of your asset:

  • Size

The bigger your business, the more it is going to cost. If you run your business in a large office or warehouse, it may cost significantly more than working from a small rented room.

  • Age of Building

Moisture and atmospheric factors cause buildings to deteriorate over time and this increases the risk of damage, leading to higher insurance costs. Repairing these damages may also be expensive because the mechanical workings in the building are most likely outdated and may require brand new installations. The type of construction for the building may also affect the premium rate. Masonry construction, which creates a non-combustible and high-resistance building, may attract a lower rate than others because of its low risk and durability.

  • Equipment

Heavy machinery will cost more to insure than small or light ones. If your business requires the former, the risks are high, and your rate will be higher too. Old machines may be easier to repair compared to new and expensive ones with scarce parts.

2. Loss History

Your insurance provider will be interested in your historical performance and specifically losses to determine your quote. Running on zero losses for up to five years may attract a loss-free discount that deducts from your overall premium rate.     Undertaking initiatives to prevent losses such as installing safety equipment and fire control tools may also attract discounts. A loss-free record in recent years can help guarantee the best value for extensive coverage.

Ensuring that your business’s building is well-maintained with top-notch housekeeping practices suggests responsible ownership, which also determines how the provider credits your insurance policy.

3. Extent of Liability

Some businesses are engaged in high-risk operations or conduct a higher volume of business than others. Deducing from this, liability rates often vary across different classes of businesses. Since insurance companies are also obligated to cover legal expenses, businesses that are susceptible to legal problems will attract a higher premium than others.

The liability rating may be determined by different factors for different industries. The provider will weigh the pros and cons specific to each business before deciding on a quote. Ultimately, the insurance provider uses a rating basis to get a good look at the amount of activity that the business conducts annually and make correct evaluations. All the necessary information will help the insurer apply a premium amount that reflects the liability exposures that come with writing your policy.

These are the 3 important factors that will affect the cost of your business insurance policies. Want to make sure you have the comprehensive commercial coverage that your business needs?  If so, then contact the experts at Patterson & Associates in Richardson, Texas.  Our dedicated team is eager to assist you with all your business insurance needs today.