Type of Business
The type of business you choose will ultimately determine how much you will pay each year in insurance. Someone who has an interior painting business will have an insurance cost that is much less than someone who has a fast food restaurant with deep fryers. The general rule of thumb is: The higher the risk, the higher the cost of insurance.
- Location, location, location
Business owners generally take into account location when buying a building for their business. Unfortunately, they are only thinking about how many customers they can get in the door, not how the location will affect their insurance costs for years to come. When deciding on a location, steer clear of large bodies of water.
Insurance companies have recently started looking at how close a business is to water when writing a business’s liability policy. Some insurance companies have even gone so far as to say they will not write new policies for any business or home within a few miles of the water and, if they do, it’s going to cost a pretty penny. How close is too close? You, and your checkbook, should be safe if you stay at least 4 miles away from any ocean or river.
- Building Construction
Insurance companies base premium rates in part on the type of building that will house your business. If the building you purchased, or are considering purchasing, is made entirely of wood you can expect a higher premium because there is a greater risk of a fire burning out of control in this type of structure. For the lowest insurance premium, consider purchasing a building made entirely of brick or stone. Looking for even more savings? Purchase a building with a sprinkler system and install a central station fire and burglar alarm. You’ll save quite a bit year after year on your insurance if you have these building protection measures in place.
- Lease Agreement
If you are renting or leasing out space to run your business, make sure your landlord doesn’t expect you to cover a portion, or all, of the insurance on the building. If your business resides in a strip mall, landlords will often ask you to insure the portion of the building in which you are conducting business. Stay clear of this type of lease agreement to keep your insurance costs low. Your landlord should cover the costs of insuring the building, not you.
By John Hester