We understand that you don’t like whipping out your credit card to purchase insurance coverage since it’s something you buy and hope that you’ll never have to use. What makes the process even more painful is when you discover that a neighbouring business is paying less than you!
There are many different factors that insurance companies use to calculate premiums, and they vary depending on the type of business you’re in. The following are some of the more common indicators to help you understand how your insurance premium is calculated and why it might differ from another small business.
This one is simple – the more money you’re making, the more business you’re doing, the more potential there is for a loss to occur.
Depending on what your business does or the products it sells, there may be a lower or higher likelihood of a loss occurring. For example, if you manufacture explosives, your products have a much higher likelihood of injuring someone then if you manufacture books. Similarly, if you run a café, your exposure is less then someone who runs a bar serving liquor.
Where your business is located can have a significant impact on the premium for your property insurance (contents, stock etc.). Are you located on a flood plain? In an earthquake zone? In an area with a high rate of sewer back-up or hail claims? Insurance companies track geographical information and claims by postal code to help determine rates. They also pay attention to your fire protection, such as how close the nearest fire hydrant and responding fire hall are to your business, and your building construction, such as what type it is, how old it is and whether or not it has sprinklers. If your business is in a remote area, there’s a greater chance that a fire would cause a total loss, hence higher rates are charged.
While business insurance policies don’t generally offer a claims-free discount like your home insurance policy might, insurance companies still take your past claims into account. For business insurance, they will generally look at frequency of claims, for example, 2 claims in 3 years or 3 claims in 5 years may give them a red flag and affect the rating that they offer.
This is often the most determining factor in premium calculation. How much property do you need insurance for and what liability limit do you want or need? In addition, are there any specialized coverages which your business requires? Keep this in mind when comparing with your neighbour.
At Bullfrog Insurance, our goal is to make purchasing insurance as efficient as possible by working with multiple carriers to find you the best quote. Please contact us if you would like to speak with one of our licensed brokers about obtaining a quote or about how any of the factors above may impact your premium.