Whether you’ve been running your own business for years or you’re just testing the entrepreneurial waters as a freelancer, you need small business insurance to keep up the good work. Insurance is your last line of defense if you’re sued over injuries and work mistakes, but it can also help you get your foot in the door. Clients often want you to have coverage before they work with you because they see it as a sign of professionalism and stability.
Insurance doesn’t have to cost a fortune, either. Insureon data shows 54 percent of small business owners pay between $400 and $600 annually (about $33 to $50 per month) for their general liability insurance, a policy that covers a business’s basic liabilities. But you may bring your insurance costs down further with these tips:
1. Compare Offers
You probably compare bids when hiring a new vendor to make sure you’re getting the best deal for your money. Do the same with your insurance. Each insurance company evaluates risks differently, which means they offer different prices for your coverage. Shopping around lets you choose the premium that best fits your budget and needs.
Low-cost coverage isn’t a good deal if it leaves you unprotected, so look at more than just the price. Consider…
- Policy limits. Your limit is the amount an insurance company pays for claims. Higher limits usually mean a higher premium, but you get more financial protection.
- Company ratings. Insurance companies are rated by independent agencies, like A.M. Best. If a company has a low rating, it may be slow (or unable) to pay your claims, which can make a stressful situation even more fraught.
- What the policy covers. A cheap policy isn’t worth it if your most common risks aren’t covered.
New to insurance? Try working with an independent insurance agency. It’s often the easiest way to get quotes from different companies and get coverage recommendations.
2. Bundle Policies
Insurance companies usually offer discounts when you buy more than one policy. It makes good business sense because it improves the chance that you’ll buy their products. But it’s a good deal for you, too. You get a discounted rate on the insurance you need, plus the convenience of having your policies all in one place.
Talk to an agent to see if you’re eligible for a business owner’s policy (BOP). It bundles two policies entrepreneurs typically need – general liability and commercial property insurance – at a reduced rate.
Bonus tip: You might also want to ask if your insurance company sells homeowner’s or car insurance. Some give price breaks on your business insurance if you also buy their personal policies.
3. Manage Risks
While you can’t prevent all accidents from happening (that’s why you have insurance), you can take steps to reduce their likelihood. Providers may even reward your risk management practices with lower insurance premiums.
For example, these safety measures may affect your rates:
- Install a central security system and fire alarm.
- Train employees in work safety.
- Get your building up to code.
- Use written contracts with clients and vendors.
- Create a disaster preparation plan.
Risk management strategies like these do double duty. Insurers consider them while setting prices, but they also reduce the likelihood of a claim. The fewer claims you make on your policy, the lower your rates will stay.
4. Classify Workers Correctly
Part of your workers’ compensation insurance premium depends on worker classification codes. Created by the National Council on Compensation Insurance, these codes indicate the amount of risk a job or work environment has. Insurance providers use these codes to set workers’ comp prices.
Why does this matter? Say you own a business in a high-risk industry like construction. The employees who head to jobsites have riskier jobs than the receptionist who stays in the office. Giving the receptionist the same code as the others most likely means you’re overpaying for workers’ comp.
But that’s not the only way misclassifying workers might cost you money. Classifying an employee as an independent contractor, even accidentally, can result in hefty fines. Get more details in the article Contractor Crackdown.
5. Change Your Deductible
This tip isn’t for everyone. On the one hand, increasing your deductible can bring down your premium. The problem is that you’re agreeing to pay more when you make a claim. In the abstract, that may seem like a good gamble. But you might change your mind once you’re shelling out for repairs after a disaster.
Before you increase your deductible, take a look at your finances and talk to an agent.
6. Pay Up Front
Many business owners pay their insurance premiums in monthly installments. This option may give you breathing room when times are tight, but if you can pay your premium in full, you’ll reduce your overall insurance bill. Just like you, insurance providers prefer getting paid up front and typically offer a discount to make that happen. Plus, if you take this option, you’ll have one less expense to manage each month.
For more tips on managing money challenges for entrepreneurs, read Top 5 Problems Businesses Face & How to Avoid Them.