No matter the industry or size, every business needs several types of insurance coverage to protect its work and assets from unexpected losses. Besides, most businesses in the U.S. are required by federal and/or state laws to have specific types of business insurance, such as workers’ compensation and disability insurance, in order to operate legally. But buying insurance can be costly, particularly for smaller businesses.
A typical small business spends about $100 per month on a business owner’s policy, and more than $50 monthly for workers’ compensation insurance. That’s an annual cost of $1,800 for just two policies. Purchasing additional coverage will of course incur additional costs.
Fortunately, there are steps you can take to reduce the cost of insurance. Here are 10 strategies to help lower your premiums and keep more of your hard-earned money in your pocket.
1. Buy the right amount of insurance coverage
While you already know that insurance is necessary to keep your company protected and operating smoothly in the event of unforeseen circumstances, it is crucial that you only purchase the business insurance that is required — which covers the risks that your business may face.
Purchasing too much will result in unnecessary expenses for your company. On the other hand, purchasing too little can leave your company vulnerable to risk. It is only by choosing the right amount of insurance coverage that you can brace yourself against risk while also saving on unnecessary costs.
2. Shop around
This is considered one of the best ways to reduce insurance premiums. In fact, it is a relatively straightforward technique and can sometimes lead to better deals than you could have imagined. Here’s how you can comparison shop and potentially save money on premiums:
• Compare quotes from different insurance providers.
• Find out whether your current insurer has a better deal than a competitor.
• Find out whether your current insurance provider offers discounts or any promotions during certain periods.
Word of caution: While comparing quotes from different insurers, make sure to consider the coverages and limits each includes. Do not simply choose the cheapest policy.
3. Consider your deductibles
By definition, a deductible is an amount you must pay before your insurance provider pays out to cover the loss. The higher the deductible, the lower your premiums become — which makes it a good approach for paring down business insurance costs.
That said, while you might be tempted to choose a high deductible because of the lower premium it entails, it is important to ensure your business can easily manage to pay the deductible should you ever need to file a claim.
4. Pay your premiums in advance
As insurance can be a substantial expense, many businesses prefer to pay their premiums in monthly or quarterly installments. But insurers are often looking to collect the entire premium amount at the time it is issued.
In fact, some providers offer a discount, wider coverage or other incentives to policyholders who pay the entire premium upfront. Use the opportunity to get the best rates on your business insurance.
5. Don’t hesitate to negotiate a reduction
Be willing to haggle with an insurance provider to see how far they are willing to come down on the premium. However, before you begin negotiating with your agent, make sure you plan and determine what policy terms you are seeking and what you are willing to pay for that coverage.
As you are likely to have a far stronger hand if you begin negotiations when your renewal is coming up, try to use your negotiating ability to get the best deal with the best coverage for your needs.
6. Opt for package policies
Purchasing a bundle insurance policy from a single provider rather than numerous individual policies is another option to save money on insurance costs.
For instance, a business owner’s policy comprises both general liability and commercial property coverage. Similarly, many other commercial coverages can be written as part of a package policy, including business auto, crime, etc. A well-defined insurance package policy might cover various additional business risks that could be useful to you, at a more economical rate versus purchasing the policies individually.
7. Check for overlapping coverages
Though most commercial insurance policies are unique, there may be overlaps with other types of insurance. For instance, it may be the case that your company vehicles are covered by both general liability and specific auto insurance. Eliminating the overlap between your policies can trim down your insurance costs.
Further, as your business grows over time, you might find that the insurance policies you previously needed are no longer relevant as the risks it covered are no longer relevant. For instance, your property policy might cover a building you sold a few months back. Make sure to take such redundant risks out of the policy so that you only pay for what you use.
8. Take steps to mitigate some risks
Just as every industry is different, so too are the risks they face. Manufacturing workers face a unique set of hazards compared to employees operating in office settings.
Identifying your industry’s risks and then taking steps to mitigate those risks can help you save money on business insurance. For instance, you can train and educate your staff through seminars about how to keep themselves safe at work, or implement an effective workplace safety plan that uses technology to help prevent accidents.
Many insurers provide premium discounts to businesses that take additional steps to reduce or eliminate hazards that prevent accidents or secure their premises to prevent thefts.
9. Classify your employees correctly
While employee classification establishes how the employee working in an organization will be paid and what benefits they will receive, it also determines your workers’ compensation rates. A rate is calculated for each classification — the riskier the business operations, the higher the premium rates.
Many business owners don’t realize that incorrect employee classification sometimes results in increased premiums. Hence, make sure that your staff members are properly classified.
10. Stick to your insurance provider
Finding an insurance company that serves your needs and sticking to them for several years can help you produce win-win outcomes. Doing so helps build up trust and fosters a good business relationship.
Most insurance providers are more than willing to keep customers whom they know are a safe bet and often offer reduced costs, additional services and possibly even deductibles to hold on to them.
