Understanding the Nuance Behind Business Insurance Quotes

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Most businesses understand the fact that they should have insurance, but many fail to purchase the proper level of coverage for their specific industry. There are tens of millions of lawsuits filed each year in the US, with most of those being aimed at small businesses.
 
Understanding the inherent vulnerability involved in operating a small business means knowing that you need to not only purchase insurance but purchase the proper level of coverage as well. But how do you know that you’re purchasing the right type of insurance with an adequate level of coverage?
 
Term limits, coverage types, and premium costs are some of the main factors that should go into your purchasing decision. Below we provide a brief outline of each of the main considerations you need to keep in mind when comparing general liability insurance quotes.

An Inside Look at How Quotes Are Developed

Understanding the nuance behind quote formulations will provide you with a more informed opinion when you’re deciding between insurance providers. Most business owners think that quotes are mostly arbitrary, however, any decent quote system takes into account a number of important variables (all of which can have a direct effect on how much your premium will be).
 
One of the most important factors in any quote is the level of risk that your business presents to the insurance company. The way that they associate a numeric value with these risks, is by consulting an industry reference that contains a list of risk ratings. Nearly all insurance companies follow the same principles when it comes to evaluating the risks associated with a particular business (and then determining the monetary value of those risks).
 
Examples of what an insurance company considers as a risk include the history/age of your business, where it’s located, which industry it operates in, and other relevant details. The actual cost that’s attributed to those variables comes from analyzing historical claim records and formulating statistical-based quotes around them.
 
The actual premium that you end up with also takes into account whatever percentage increase the insurance includes for their own profit. Generally speaking, it’s very hard to suggest what your company should be paying for an insurance policy without knowing exactly which vulnerabilities it’s subject to (which is the entire purpose of quotes in the first place - to see if you and the insurance company might be a good match for one another).

Know Your the Needs of Your Business and Its Required Coverage Levels

Understanding the actual meaning behind an insurance quote is one thing, but knowing exactly which coverages your business needs is another. Every business has different needs, different coverages, and will ultimately have different policies. Once you know what your business needs (and more importantly - why it needs those specific coverages), you’ll be able to go into the purchasing process with much more confidence.
 
Why should you even have business insurance, to begin with? The answer to this might seem obvious to some, but you’d be surprised at how many business owners don’t even think about opening an insurance policy. Most of them are scared of how much it will cost, but little do they know just how much peace of mind an insurance policy can provide (especially if they operate in an industry with a certain level of risk).
 
In order to receive the most accurate quote possible, you’re going to need to have a thorough understanding of exactly what your business needs (and why). Review the following questions and considerations and form a checklist of your business’s needs/vulnerabilities.
 

• Which business classification do you fall under? Are you incorporated? Sole proprietorship?

• Do you sell products or provide a service? What type of products and/or services?

• What industry is your business in?

• What number of employees does your business have?

• How much money does your company allocate to payroll?

• What services do your employees provide? What are their job requirements?

• Are there any daily operational risks inherent to your operation?

• Do you own property or rent space? 

• What’s the total amount of your company’s revenue?

• What type of possessions does your business need operationally?

• What part of the country is your business located?

 
While answering all of these questions might seem like overkill, the insight that you gain from completing this type of checklist is invaluable. Understanding your business’s operational risks can mean the difference between purchasing an excellent policy, or purchasing one that falls very short of your company’s specific needs.