You're in business to make money. One way to increase profit, of course, is to cut expenses. A savvy small business owner can wring substantial savings from their commercial insurance.
The key is to reduce costs without gutting your coverage. Saving is great, but you cannot put your venture at risk just to save a few dollars. Here are 14 tips for reducing your business insurance premiums.
1. Shop your coverage with several providers.
Commercial insurance providers evaluate risk using algorithms that can spit out very different quotes from the same information. That means you could find substantially lower rates without changing your coverage simply by shopping around.
How often should you get quotes for your business insurance policy? Most financial experts recommend you do it annually.
2. Bundle with a business owners policy.
A business owners policy (BOP) combines several common types of protection (property, business interruption and some liability) into a single plan, often at a lower price than you could get by shopping for the coverages separately.
However, read the policy carefully before you sign. Many BOPs don't include auto insurance or professional liability insurance, and most don't cover workers' compensation. You could need separate policies for these.
3. Consider a different kind of bundle.
Some commercial insurance providers also sell home and auto insurance. Why does that matter? Carriers often provide discounts when you buy multiple lines of coverage. If yours does, you could save big without touching your coverage.
4. Evaluate your protection and your risks.
Take a thorough look at your policy and ensure you don't have coverage you don't need. If you don't use a vehicle for your business, for example, you likely don't need commercial auto insurance. If you don't have employees, you don't need employment practices liability coverage. Make sure you're not insuring yourself against a risk you don't face.
5. Increase your deductible.
Many policyholders of all types don't realize the relationship between their deductible and their premiums. In a nutshell, all other factors being equal, the lower your deductible, the higher your premium.
So, a good way to lower your premiums is to raise your deductible. However, you'll have to pay that deductible before you receive any help on a claim, so make sure you set it at an amount that you can come up with in a hurry.
Another benefit of this is that the higher deductible will discourage you from filing smaller claims. Keep reading to see how this can help.
6. Is there a claims-free discount?
Providers love policyholders who don't file claims. If your business has been claims-free for years, you could be eligible for a discount. This is why it's a good idea to avoid filing smaller claims. Be sure to ask about this as you're evaluating carriers.
7. Ask about loss-prevention programs.
Talk with your provider about ways you can reduce risk in your business. These include starting a workplace safety program, instituting disaster preparations and initiating a theft-prevention plan. All of these will reduce the risk of a claim, which is why you might get a price break.
8. Look for group rates.
Many providers offer group rates for businesses that fill the same niche. Ask if your provider does; if not, explore purchasing commercial insurance through a professional organization. You might have to pay a fee to join the organization, but you can recoup that quickly through reduced premiums. Plus, membership in the professional group could give your business a higher profile and could lead to important contacts with peers.
9. Change your payment method.
This varies by provider, but you can reap substantial savings by paying your premium in full upfront. Commercial auto insurance providers, for example, can discount a year's premium by up to 15% if they get paid in a lump sum. You could also authorize an electronic funds transfer.
10. Be proactive.
Another great method of saving money on business insurance is being proactive. This means you need to go above and beyond to protect all elements of your business. This will eliminate risks, which can prevent accidents and reduce your insurance costs.
11. Don't focus solely on cost.
Although it may seem counterintuitive, the cost of the policy is not always the most important part of an insurance policy. Rather, you should make sure that you have all the coverage you need. If not, you may be saving some money for your monthly premium. However, if and when you have some sort of accident, you may end up paying much more in the long run.
12. Understand which business insurance coverage you need.
It can get overwhelming and expensive when choosing business insurance. If your risk of a certain type of loss isn't great, you may not need certain types of insurance policies. Take a look at the common policies and what they cover to help you decide.
| Insurance policy type | What it covers |
| General liability | Third-party claims of property damage, bodily injury, and libel and slander |
| Professional liability | Claims that an employee did not do their job to professional standards, leading to a loss |
| Commercial property | Business property such as furniture, electronics, materials, supplies and inventory |
| Business owners | Combination of general liability, commercial property and often business interruption insurance |
| Business interruption | Lost revenue and expenses when a business is shut down because of a claim |
| Cyber liability | Internet-based risks that could lead to hacking or data breaches |
| Commercial auto | Vehicles used for commercial purposes |
| Workers' compensation | Claims for employees injured on the job |
13. Keep good credit.
Credit scores are not always factored into commercial insurance policies. However, some states allow insurers to use your credit history when rating commercial auto policies, so good credit will help you get a lower rate. While a lower credit score won't disqualify you from getting insurance, a higher one can help you get certain discounts.
14. Evaluate your business.
Do a risk assessment of your business to see what your biggest risks are, and design insurance coverage to cover those risks. You may want to enlist the expertise of an insurance agent or risk assessment expert to determine your biggest risks and offer advice on how to reduce them and the best ways to protect yourself from losses. For example, a small business may not need as much coverage as a bigger company. Get the appropriate amount and right type of insurance.
By treating your commercial insurance as a planned expense instead of an afterthought, you might be able to reduce the amount you spend while maintaining full coverage. It takes a strategic approach to accomplish this mission, but it could well be worth it to your bottom line.