Insurance is a vital cost of doing business. You must protect yourself from mishaps ranging from inventory theft to a data breach to somebody having an accident on your premises. It offers a lifeline when anything unexpected occurs and, in many cases, is legally required to run your business. Proper insurance can save your company but paying too much for insurance can interfere with your ability to thrive and grow. That's why it's crucial to find quality coverage with reasonable costs. So, then, how much should small businesses pay for insurance?
The cost of insurance is affected by various factors, but the primary ones are your industry and the size of your company. Insurers consider some industries, such as manufacturing (which requires manual labor or machinery) or healthcare (which is often targeted by cybercriminals), to be riskier than others. Brick and mortar sites open to the public can create risk due to the possibility of a customer being injured or experiencing property damage on your premises. Any industry whose employees must drive long distances will also incur higher costs. Larger companies also inherently attract more risk.
Your insurance premiums will likely increase as your company grows, as well, because more people involved create more opportunities for injury. They may also be affected by any claims you make, the overall economy, and levels of risk.
There are three kinds of insurance you need to account for:
1. Business owner's policy. This bundles general liability, commercial property, and business interruption insurance. It helps businesses with fewer than 100 employees or less than $5 million in annual revenue. You need a business owner's policy if you have any brick-and-mortar location or significant assets (equipment, inventory, etc.). Riskier businesses, such as bars, auto repair shops, or larger companies, don’t have this option available. In these cases, you would need to purchase the previous mention coverages through individual policies. An insurance broker can help you establish eligibility and find the right policy.
2. Professional liability. This policy can cover risk such as crime, cyber, employee practice liability, and directors and officers. These coverages can protect you from both internal and external claims.
3. Workers' compensation. Workers' compensation is legally required in every state and covers you when an employee gets hurt on the job. It helps provide for their medical and living expenses while they are unable to work.
If you are in certain specialist industries, you may need specific policies not mentioned above.
Insurance costs vary by type of business and even over time. That can make it challenging to budget for policies, and it is often a good idea to set aside slightly more than you need as a precaution.
Insurance is a cost of doing business, and a vital part of your risk mitigation strategy. However, you can take steps to lower your premiums, like taking basic risk precautions. For example, installing a burglar alarm on a brick-and-mortar building or storefront may get a slight discount on a business owner's policy. A return-to-work program can help reduce workers' compensation premiums. Even things like being diligent about using wet-floor signs or putting ample warning labels for a step up or down will make a huge difference, as it shows due diligence and offsets liability towards someone who wasn't paying attention.
One excellent way to lower your rates, especially on workers' compensation, is to partner with a PEO. A PEO can provide you with cost-effective insurance coverage. With workers' comp, your employees can be added to their policy, diluting the effect of claims through a much larger pool, and allowing you to benefit from a better experience rate modifier. They can also help you design a return-to-work program, which reduces the cost of each claim and the risk of losing a valued employee after an injury or illness. Even with other kinds of insurance, a PEO can help by negotiating better rates, creating insurance pools, and knowing where to find the best rates for your specific type and size of the company.
A PEO can also help you save money in other ways. For example, they can reduce risk by ensuring compliance, especially with payroll, provide better healthcare and retirement coverage for your employees, and free up your internal HR team to meet strategic goals.
Insurance provides your business with crucial protection but can be expensive. Getting the best rate for the best coverage is vital to ensuring your business's survival and growth. Partnering with a PEO can help you do this.