Matt Hands, Business Director, Insurance
Business insurance (or commercial insurance) protects business owners of all sizes from potential losses as a result of unforeseen events that can occur during day-to-day operation of your business, this includes property damage, injuries, theft, or even tech errors. The most common types of business insurance are commercial property insurance, general liability insurance, and professional liability insurance (also known as errors & omissions).
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Whether you’re a new small business owner or simply thinking about commercial insurance for your expanding operations, small business insurance covers many risks that, without it, could have detrimental effects on your finances. Running a business is an investment of both your time and money. You made a calculated decision to launch the business, commercial insurance has been created to help you protect it.
The price of commercial insurance varies because many different risks exist depending on the type of business you run. For a small business, where you mostly work out of your home, with a laptop and other simple tools, a commercial insurance policy could be cheap. The bigger and more complex your operation becomes, the more you’re exposed to insurable risks, and therefore the more you will have to pay.
For example, let’s say you start out making ceramic mugs. With some clay, a pottery wheel, an oven, and a laptop - you can earn a simple income. All things considered, the risks are relatively low, so if a mug breaks, you can make a new one. Should a fire breakout, you can use a fire extinguisher. As you scale up, maybe you open a shop, which brings in person shoppers, employees, and a slew of other potential problems that expose you to serious financial loss.
All in all, if you own a small business you should expect to pay anywhere from $500 to $5,000 annually for your business insurance policy. Remember, the price you pay will depend on the type of business you own and the associated risk factors of your trade.
Commercial property insurance
General liability insurance
Professional liability insurance (E&O)
Commercial auto insurance
Cybersecurity liability insurance
Directors and officers liability insurance (D&O)
Key person insurance
Business interruption insurance
Compare commercial insurance quotes from multiple providers online
Different business insurance products will vary in price from insurer to insurer. To give yourself the best chance at finding a great rate, we recommend shopping around to find the best price for the product you want.
Bundle your products
Bundling all your commercial insurance products with one insurer has the potential to save you money. You should comparison shop for bundled quotes - ask any prospective insurer to create you a quote that includes all the coverage you need. There may even be an option to have your personal insurance and commercial insurance policies with a single insurer that could lead to an even greater discount.
Understand your needs.
No two businesses are created alike, so each business insurance policy should be tailored to meet your needs. If your business is closer to water, you may consider commercial property insurance that includes overland water & flood coverage. Should most of your business activities happen online, you might want to think about cyber security insurance. Make sure to only get the insurance coverage you need.
Manage your business risks
There are always risks, but the more you can do to prevent them from becoming a reality, the more you can save. Consider installing cameras to prevent potential thieves or asking your drivers to take a drivers education course to reduce threats to your business.
Find a group rate
Working in a specific niche has its advantages and that includes getting cheaper commercial insurance. Ask the group you might be affiliated with if there is a preferred insurer, if so, give them a call and ask if they have discounts you can use.
The cost of commercial insurance for your business will vary based on a number of factors. In general, the bigger the business, the more potential risks, the more business insurance will cost. Below, we outline the most significant factors affecting the price you pay. After getting an initial business insurance quote online, speak with the broker about optimizing your policy to get the best value.
Types of commercial insurance policies
There are many types of available business insurance coverages and the more you have, the more it will cost. Most businesses begin with general liability coverage to protect themselves against third-parties. As you grow, you may want to add more coverage for specific risks or perils, which would increase the amount it costs in exchange for more protection.
Commercial insurance limits
Within each type of coverage, there are limits you can set. The higher the limit, the greater amount of coverage, and the more it will cost you. Speak with your agent or broker about setting the appropriate limits for your business to avoid over paying or being under insured.
A deductible is the money you have to pay before your insurance provider will pay the rest. A higher deductible typically translates into a cheaper premium. It’s a sign you’re willing to accept more risk because you’ll only submit a claim for more than the deductible. When setting your deductible, however, keep in mind you’ll be responsible for the up-front out-of-pocket expense, so make sure you can afford it.
The size of your business
The bigger they are, the harder they fall. That said, if you have a warehouse the size of 18 football fields, it will cost you much more than a boutique brick and mortar retail store with one location. With more property and assets, the more it will cost to insure.
The type of industry in which your business operates
The construction industry, for instance, is fairly expensive to insure due to the high risk to its workers and third parties on site. There’s also the expensive equipment they use, which must also be insured. A private piano teacher, on the other hand, who teaches out of their home, won’t face the same potential hazards and will ultimately have to pay less for their insurance.
The location of your business
The cost of business insurance can vary significantly from province and city. A business in British Columbia may need protections for earthquakes increasing the cost of property insurance. Another business may operate near water meaning they have a higher risk of flood. If your business is in a high crime zone, it may cost more to protect yourself against theft and vandalism. Before you buy or lease your location, check the cost to insure it - it could change your opinion.
Annual business revenue
The more money your business is making, the more it will cost to insure because there’s more to protect if something happens. For instance, if a third party injures themselves in your facility and decides to sue, they may ask for more given the size of your business.
Your business insurance history
Have you had many claims against your business in the past? Are you notorious for receiving professional liability claims against you? If so, you’ll likely pay more for commercial insurance. An insurance company uses your past as a predictor of what’s to come and a troubled history could mean a turbulent future, and the insurer will charge extra to protect you.
Number of employees
The more employees on staff, the greater chance of making a professional liability or general liability claim against your business. All the training in the world can’t prevent all the potential risks from becoming a reality. The more people coming in and out of your business, the higher the likelihood of a problem occurring.
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Matt started his professional career at CARPROOF where he honed his marketing and analytical skills for over 3 years. Matt then took his wealth of experience to Ratehub.ca’s Toronto offices, working with insurance providers, agents, and brokers to grow and expand the Insurance business unit. He is a thought leader in the community and a valuable insurance resource to respected publications like the Globe & Mail, Toronto Star, Huffington Post, Yahoo News, and 680 news radio in Toronto.read linkedin bio
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