For anyone that drives, they know that there are many factors that affect the cost of auto insurance. Many of those factors also apply with business insurance. Below, are some factors that can affect the cost of business insurance.
If your business has a track record for making more claims that the industry average, you will be penalized with higher insurance premiums. Claims, whether claims that you make or claims made against you, means that you are a greater risk than other similar businesses who don't make claims. Unfortunately, there are only 3 solutions to overcome this:
- raise the deductible so that you pay a higher amount to cover claims for damage or replacement costs;
- implement procedures to lower the likelihood of claims processes;
- wait; time heals after all.
Insurance costs vary based on location. This might be due to higher crime rates, exposure to extreme weather conditions, more liberal/conservative courts, labour and transportation costs and the cost of goods. Moving locations may be a way to save on the cost of insurance.
Each insurer has 'target' industries that they want to insure or that they specialize in. For those 'less desirable' sectors of the economy, they may quote a high premium to price themselves out of being competitive or they may even simply refuse to provide a quote. The reasons include industry-wide risk factors and numbers of claims. It's best to work with a company that wants to work with your industry in order to get the best rates.
The size of your business and how much money you make will affect the cost of your insurance. A large business generally has more property and equipment to insure and more clients, relating to higher exposure to claims. If you get sued, your earnings may be reflected in settlement costs. Hence, the cost of insurance will be higher the more your business grows.
The deductible is the cost you need to pay out of pocket for claims before your insurance coverage steps in to pay. Usually, a higher deductible means that you will have to pay more in the event of a claim but will result in a lower policy cost because the insurance company will have to pay out less.
The contracts that you have signed also affect your insurance costs since they reflect and assess your liability. This is especially important for errors and omissions insurance coverage.
The state of the financial markets, natural disasters, government stability, wars and other world and local factors will affect the cost of insurance, both positively and negatively.
General Liability Insurance is directly affected by your employees. The more people that work for you and need to be covered, the more expensive your coverage will be, because there are more people to potentially cause a claim to occur.
Most businesses need multiple types of insurance, including property insurance, WSIB, liability insurance, product insurance and so forth. Each type of insurance will be priced differently. The more likely there is to be a claim, and the higher the cost of potential claims, the higher the cost of insurance.
The unit cost that you pay for insurance decreases the more you buy. So, for example, a $5,000,000 policy will not be 5 times the cost of a $1,000,000 policy; instead it may be only 3 times the cost of a $1,000,000 policy.
If your business needs a higher limit of insurance due to contracts that you have signed, for peace of mind or because you operate in a higher risk industry, trying to save money by lowering your limit may not be the best option for you; it may be better to raise your deductible to lower the cost instead. Saving a few hundred dollars today could result in hundreds of thousands of dollars in uncovered claims or even the failure of your business.
For members of The Chef Alliance, the liability insurance that comes as a member benefit is not affected by these factors; the rates are the same irrespective of where you operate your business, your experience and your claims history etc.
The Chef Alliance is a leading foodservice association in Canada offering Chefs and Entrepreneurs a place to grow their business. They can benefit from liability insurance to protect their clients and finances, peer support strengthen their business, discounts to lower their business costs, market their services and increase profits. This leaves them time to concentrate on what they do best - cook great food!