Small and Medium-sized Enterprises (SMEs) often encounter risks, including liability claims, property damage, and business interruption. At the same time, SMEs often have limited funds in terms of dealing with damages. So, whether you’re business just opened up or it has been operating for quite some time now, you should be aware of the factors affecting your SME business insurance premiums.
Understanding these factors allows you to reduce the overall cost of your premium, but remain sufficiently covered based on your business needs.
In this article, we’ll discuss some of the most common factors affecting the cost of your SME business insurance.
1. Industry and Business Type
The first thing insurance providers consider when it comes to finalising SME business insurance premiums is the business type and industry. This is because some industries are riskier than others. For instance, if it’s between taxi fleets and convenience stores, the former usually comes with higher premiums than the former. Although there’s the risk of theft in managing convenience stores, it often costs a lot less than the damages that taxi fleets may encounter.
Even if it’s about basic coverage, businesses with higher risks still come with higher premiums than the less risky ones.
2. Business Size and Revenue
Businesses with higher revenue and a larger number of employees usually pay more due to high exposure. Insurance providers often take these factors into account since the higher the number of employees and revenue, the higher the exposure they have.
For instance, if there are more employees, there’s a higher possibility of frequent insurance claims. At the same time, if there’s high revenue, the higher the amount of money the business loses in case the operation pauses.
Although it’s impossible to prevent the need to hire more employees, to get higher revenues, it’s essential to be aware of these factors if your premium suddenly becomes more expensive.
3. Coverage Type and Limits
If you have an insurance broker or adviser, they usually analyse the risks and needs of your business, which can significantly affect the coverage type and limits of your SME business insurance.
If your business requires higher limits and additional insurance coverage, it guarantees that your premiums will go up. Meanwhile, in some cases, even if the insurance adviser recommends their client a specific insurance package and essential additional coverage, they may still refuse to pay higher premiums. Unfortunately, if they settle for the basic SME business insurance premium, they may lose more than the amount they could invest in insurance.
4. Claims History
The claims history can also affect the insurance premium. If you often file for claims, it means that your business is high risk. It’s either due to the effects of the market or you’re not implementing effective risk management practices.
Usually, it doesn’t matter how much the insurance claim you previously filed. The biggest factor is the frequency of filing of claims. Meanwhile, if you haven’t filed for claims before, and your record is clean, it guarantees that your premium won’t go up.
5. Location and Business Premises
Another factor you should look out for is the business location. Whether it’s a physical store or an office, you can still experience various problems, including natural disasters, fire, and theft. So, before you decide on the office address, you should first ensure that the area is often safe from various disasters.
For instance, if you decide on having an office in an isolated place, like near the beach, you may encounter more natural disasters than if you decide to settle down in a business area.
6. Risk Management and Safety Measures
It all comes down to risk management. You can start by implementing security measures, such as surveillance cameras and locks with alarms. In addition, implement safety protocols, and enrol your employees on training programmes about handling emergencies, and other risks.
In addition, you can attend business management programmes, as a business owner, so that you stay updated on the latest safety measures for businesses.
7. Policy Deductibles
Lastly, don’t forget about the policy deductibles. Insurance deductible is the amount insurance policyholders pay out of pocket when before the insurance policy kicks in. So, even if you avail of paying for less amount during the initial or monthly payment, you’ll still need to spend more money when you encounter something unexpected.
Final Thoughts
Understanding the most common factors affecting SME business insurance premiums can significantly help you manage your finances, and the safety of your business. By assessing these risks, you can feel more at ease when dealing with risks. At the same time, even if you’re not facing any problems, you can still feel safe.
Do you also keep tabs on the factors affecting the cost of your SME business insurance premium? Let us know by commenting below!