While every business needs insurance to protect its assets from unexpected losses, insurance can be costly. For instance, a typical small company spends about $99 per month for a business owners policy and $111 monthly for workers' compensation insurance. That's an annual cost of $2,520 for just two policies. Fortunately, there are steps you can take to reduce the cost of insurance. Here are 10 premium-reducing strategies to consider.
One of the best ways to reduce your commercial insurance premiums is to shop around. Comparison shopping is essential since two insurers may charge widely different rates for the same coverage. If you're knowledgeable about insurance coverages and are comfortable using the internet, you can shop for insurance online using a web-based insurance agency like Insureon or CoverWallet. If you don't know what coverages you need or prefer a more personalized approach to shopping, you can ask an independent agent to solicit quotes on your behalf.
When comparing quotes from different insurers, be sure you consider the coverages and limits each includes. Don't automatically choose the cheapest policy.
Buy Package Policies
Another way to reduce the cost of business insurance is to buy a package policy rather than several individual policies. An example of a package policy is a business owners policy, which includes both general liability and commercial property insurance. Besides liability and property, many other commercial coverages can be written as part of a package policy, including business auto, crime, and inland marine coverages.
Review Your Auto and Equipment Schedules
Has your business insured cars or trucks for physical damage under a commercial auto policy? Have you insured moveable equipment, such as bulldozers or cameras, under a commercial property or equipment policy? If the answer is yes to either one or both of these questions, you should review the schedule of covered vehicles or equipment before your policy renews to make sure it's accurate. If you no longer own all of the property listed or have purchased items that aren't on the list, report the changes immediately to your agent or broker, or insurer.
Pay Premiums in Advance
Because insurance can be a substantial expense, many businesses prefer to pay the premium in monthly or quarterly installments rather than all at once. Insurers, on the other hand, like to collect all of the premium when the policy is issued. Accordingly, some may offer a discount or other incentive to policyholders who pay the entire premium upfront.
If you're considering a premium payment plan, ask your insurer if a discount is available for paying in advance.
Look for Overlapping or Unnecessary Coverages
While most commercial policy forms don't duplicate other types of insurance, overlaps may occur. For instance, hired and non-owned autos may be insured under both a general liability and commercial auto policy. Similarly, computer equipment may be insured under both a commercial property and an electronic data processing (EDP) policy. You can lower your cost of insurance by examining your policies for duplicate coverages and eliminating the overlap.
Businesses change over time and your policies may cover risks that no longer exist. For instance, your property policy might cover a building you sold six months ago. Some risks may still exist but require less coverage (or none at all) due to the passage of time. An example is cars and trucks, which usually decline in value as they age. Auto physical damage losses are valued based on the actual cash value of the damaged vehicle. You can save money on auto insurance by eliminating physical damage coverage on older vehicles.
Focus on Safety
An effective workplace safety plan can help you reduce or eliminate hazards that can lead to accidents, injuries, and lawsuits. Fewer losses mean lower premiums. Contact your insurer if you need help creating your plan. Another way to reduce accidents is to use workplace safety technology, like wearables, internet-connected sensors, and smartphones with safety apps. These types of devices can help prevent accidents and improve the health of your workers.
Many insurers will provide premium discounts to customers who secure their premises with deadbolt locks, cameras, monitored alarm systems, and other devices.
Classify Your Workers Correctly
Every business that purchases workers' compensation coverage is assigned one or more classifications that reflect the nature of its operations. For instance, businesses that operate as fast-food restaurants will likely be assigned the classification Fast Food Restaurant. A rate is calculated for each classification. Depending on the state, rates may be established by insurers or a rating organization. The rate reflects the riskiness of the operation and the likelihood that workers will be injured. Generally, the riskier the operations, the higher the rates.
Because the rates you pay for workers' compensation insurance depend on the classifications assigned to your business, it is important to ensure your business is classified correctly. Contact your agent or insurer if you think the classifications listed on your policy are incorrect.
Add or Increase a Deductible
A common way of reducing insurance premiums is to add or increase a deductible. Deductibles are a type of self-insurance and are commonly included in property and auto policies. They are sometimes applied to property damage claims covered by liability policies. When adding or increasing a deductible, be sure the amount you select will be manageable as an out-of-pocket expense.
Be Active in Trade or Professional Organizations
Some trade or professional organizations offer insurance coverage to members through an affiliation with an insurance company. This coverage may be cheaper than insurance you purchase on your own. Even if the organization doesn't offer insurance, its members may share tips on how to obtain appropriate insurance at a good price.
Train Your Workers
Employees need training to ensure they perform their jobs properly. Well-trained workers, for instance, are less likely to sustain on-the-job injuries or injure someone else. Businesses that sustain fewer losses will pay lower premiums for workers' compensation insurance.
Training is especially important for vehicle drivers. Distracted driving is a major contributor to the increase in vehicle accidents in the U.S., so employers should implement a written distracted driving policy. Employers can evaluate the effectiveness of their training program by using telematics to monitor drivers' behavior. They may also earn a substantial premium discount. For instance, businesses that participate in State Auto's Fleet Safety 360 program may receive up to a 10% discount at enrollment and up to 25% discount at renewal.