Finding the right insurance policy for your business is crucial to keeping your business safe in case of an accident or lawsuit. Business owners policies (BOP) offer various coverages for small businesses in low risk industries.
While this insurance is designed to save small businesses money, they an still be expensive. The cost of a business owners policy varies depending on several factors, however, and knowing these factors can help you further save money on your BOP.
Location is incredibly important for your business. Having a great location can set your business up for success from the very beginning. Usually, though, great locations require a lot of money—including in your insurance policy. A BOP combines property insurance and general liability, which are both affected by your location. Heavily populated areas will mean higher liability needs and premiums. Certain locations are also prone to environmental disasters, which can affect the property side of your BOP. Obviously, you don’t want a location where there is no foot traffic but be careful choosing your business’ location with insurance in mind.
Certain industries pose higher risks than others. Construction companies and healthcare providers, for example, will face high insurance premiums due to the extreme risks they face when dealing with specialized equipment and multiple clients. Your industry also influences the type of property you will need. A large hospital with multiple floors filled with expensive equipment will cost much more to insure than a small shared office. This is a factor that you cannot change, but should be aware of, nevertheless.
Your credit score affects a lot of insurance policies, from your car to your business. This is because insurance companies see a credit score as a way to determine your reliability. They want to know that you can be trusted to pay in full and on time. Low credit scores typically mean high premiums.
To manage its sway on your BOP premiums, raise your credit score by setting up auto draft for bills and paying off loans or credit cards.
Another risk factor for your business is the history of previous claims. For example, if you live in an area with frequent hailstorms and you’ve filed multiple claims for the damages within the last few years, your insurance premiums will be a lot higher. Before filing an insurance claim, have the damaged appraised by an expert. In some cases, the damage may be cheaper to fix out of pocket than the deductible you would have to pay for filing an insurance claim.
You want to have the best policy possible for your business. A BOP can be adjusted depending on the amount of liability risk you face. This policy usually comes with limits by the million, such as $1 million per year. There are additional coverages you can add to enhance your policy, however. While extra coverage will protect your business, it will also cost more. Be sure to calculate the risks your specific business faces and speak with an insurance agent and financial expert before signing a BOP policy.
You can also add different types of insurance, since this policy is a type of package policy. While basic BOPs combine general liability and professional liability, you can also add coverages such as professional liability, umbrella liability, product liability, equipment breakdown insurance, commercial auto insurance and more.
If you or your business are on the new side, a BOP may be more expensive. On the other hand, you won’t have a long history of claims to raise your rates. The insurance company will still look at your credit score, though, so always be conscious of your numbers.
Businesses with a history of claims may pay higher rates for a BOP than those without. However, new businesses can still face high rates as they have no history, which can make the insurance provider compensate for possible losses. This is why insurance providers typically ask for a form of history concerning your business when calculating quotes or discussing coverage.
When looking for a BOP to cover your business, be sure to speak with an insurance agent and shop around to discuss your business’ coverage needs before purchasing a policy. Not all BOPs are created equal and it is crucial that you find the right coverage for your business needs at the right price.