Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent Daniel Walker

UPDATED: Mar 31, 2022

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Business owners are often surprised at the expense of business insurance that will be incurred throughout the fiscal year.

Everyone has heard stories about businesses that died because sufficient insurance was not carried in an effort to save money on the business insurance cost.

Wise business owners understand that their livelihood, and that of their employees, depends on their willingness to carry adequate business insurance against loss.

Save money and time by comparing business insurance quotes online. Compare rates among all the top insurance companies in the nation and find the right policy for your business. Enter your ZIP code above to begin!

What are overriding factors?

Perceived risk is the determining factor for insurance companies when annual insurance premiums are calculated. Business decisions affect the cost of business insurance, so the decision-makers can lower the premiums by making certain adjustments. Certain restraints exist in these major categories because businesses incur risk and must comply with legal insurance requirements.

Insurance provider – Comparison shopping is the best way to find a reputable insurance company that will meet the specific business insurance needs. Each insurer offers different discounts to shape the risk-lowering behaviors of their business policyholders. Detailed quotes will reveal the cost of insurance coverage. Each quote must be studied closely to determine the amount of insurance offered.

Legal requirements – There are different types of business insurance each company must have. Every state requires minimum levels of liability insurance coverage. Also, any business with employees must carry worker’s compensation and unemployment insurance. Additional insurance coverage is required for the type of work conducted.

Business type – Levels of risk vary for the various types of businesses. For example, construction companies are considered to encounter higher risk of loss than office-based businesses. These risks are covered by higher insurance premiums paid by the construction company. Because of the wide range in estimated risk, the average cost of business insurance can be very different depending on the type of business it is.

Liability – Every business must carry the minimum levels of liability coverage to insure against the cost of damage or loss of property belonging to another person or business. Each state has a different requirement for liability coverage.

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What are components that vary?

Insurance policies are comprised of various coverage components that vary by the type and size of the business. Research and comparison shopping will reveal the best composition of insurance for the business that will not benefit from the use of a business owners policy, or BOP. Specialty coverage can be added to the conventional BOP, but many businesses will outgrow the basic coverage offered under a BOP. These components will impact annual business insurance premiums.

– Property Insurance

Buildings that house businesses must be covered with replacement value insurance to prevent a significant loss from closing the business. Each insurer offers various subcomponents with the property insurance that can be adjusted to cover special features of the building, including any green energy apparatus.

– Contents Insurance

A rider on the property insurance that is designed to cover the contents of the building can replace inventory and office equipment damaged during a fire, major weather event, or natural catastrophe. Specific information concerning the type of contents must be provided to the insurer so that there can be adequate replacement in the event of physical damage to the insured contents.

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– Automobile Coverage

Insurance for replacing every vehicle in the company’s fleet might be more expensive than paying for the cost to replace the vehicle. Every auto insurance policy must be adjusted for the type of vehicles that exist under the company’s ownership. Commercial auto insurance coverage is written under “symbols” that define the rules of coverage. Insurance companies follow this method of underwriting coverage to reduce the maintenance efforts for the business.

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– Equipment Insurance

Specialized equipment that is essential for producing products and providing services must be insured against loss. Certain insurers specialize in coverage for manufacturers and others that use highly specialized equipment. If the equipment is essential to conducting business, it should be insured at replacement cost.

– Public Liability

When the business facility is open to the public, this special category of liability insurance coverage will cover the cost of litigation if someone is injured onsite. Accidents can happen on the premises, and this type of insurance is required by most states for any business that hosts the public on the property.

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– Professional Indemnity

Physicians, accountants and consultants carry this special type of liability insurance that will cover the cost of litigation resulting from incomplete or omitted advice that results in significant financial loss for someone else. Specialty insurance companies offer this category of liability insurance, which enables them to create pools of policyholders with similar levels of risk.

– Life Insurance

Covering the lives of every owner and principal is an important choice that can save the company from closing if the unimaginable happens. Only 20 percent of all businesses survive the loss of a significant player. Naming the company as the beneficiary can provide funds for the transition period and the associated legal expenses.

What are cautionary choices?

As the company grows, the insurance coverage needs will evolve. Care must be exercised to adjust the insurance policies as the company is able to shoulder more expense. Over time, you may decide to increase or add other types of coverage, but liability coverage must be increased as more risk arises to be sure you have adequate insurance coverage.

Insure against loss – Every business can afford a certain amount of expense to replace small items. Insurance is designed to cover everything above that threshold. When insurance is carried for every expense, the premiums will be exorbitant. Large companies can withstand replacing one piece of equipment but will insure against loss that is more than a few thousand dollars.

Carry sufficient liabilityLitigation brought against a company can be devastating to the future of the company. Umbrella liability policies are designed to provide millions of dollars of coverage apart from the subcomponents in each insurance policy, such as auto, property and product.

Fund the continuity plan – Companies that write a continuity plan are more likely to survive catastrophic events. Insurance proceeds should be used to pay for the expense of restoring the business to prior operating levels.

Conduct annual reviews – All insurance policies should be reviewed for unnecessary coverage and missing elements at least once during the fiscal year. These reviews can save thousands of dollars for larger businesses.

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What’s the final evaluation?

Insurance decisions are complex and require sufficient information to make the best choices. Comparing insurance companies is an important step because each one will offer unique policies that will meet specific coverage needs. Bundling insurance coverage is often far more economical than buying separate insurance policies for every need. So, business owners should be sure to consider several options from different insurers in order to get the best deal on the most coverage for their business. The time required to conduct comparisons and update policies will pay dividends in lower annual insurance premiums. Overall, it is worth spending the time to be sure you are getting the most for your money when it comes to your business insurance plan.

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