THURSDAY, JULY 30, 2020
Secure financial planning will help your business succeed in the long run. However, the overhead costs you must pay, such as your insurance premiums, might vary over time. One of the policies you might buy for your business is general liability insurance. However, general liability premiums might go up periodically. The business will have to be able to absorb those costs. Why does this happen? What can you do to help yourself avoid unmanageable liability premiums?
Understanding General Liability Insurance
Businesses usually must buy certain types of insurance, one of which might be general liability coverage. A policy helps an at-fault business compensate third parties for harm caused to them. The business can avoid cost losses even though the mistake was their fault. General liability coverage usually applies to property damage, bodily injuries, product liabilities and other losses common in most businesses.
Insurance carriers base premiums around the risks a client poses the insurer. A risk is the likelihood a policyholder has of filing a claim on their insurance policy. It therefore represents how likely an insurer is to have to pay out for this customer. The higher the cost risk the client is to the insurer, the more likely the insurer is to have to pay a claim. Therefore, they might have to charge someone more to absorb their cost risk.
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Sometimes, insurers increase liability policy costs to adjust for inflation. They might also have to increase rates due to industry-wide changes that drive up risks. These are often manageable and minimal increases. Some policyholders won’t see a change.
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If you increase your policy benefits, then you will likely see your rates go up.
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As the business grows or offers more diverse services, its risk levels might rise. The insurer might have to adjust premiums.
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If your policy has a deductible, and you decrease that deductible, then you will shift more of a cost burden onto the insurer. Therefore, they might have to charge you more. However, many general liability policies don’t include deductibles at all.
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One of the easiest ways to see a premium increase is to make a claim on your general liability policy. When you must make a claim, that claim is an indicator to the insurer that you pose a risk to them. As a result, they might have no choice but to raise your rates. An increased price is not a guarantee after a claim, however.
Even if claims might cause your premiums to rise, there are other ways you can keep your general liability insurance costs manageable. Your commercial insurance agent will help you learn about savings techniques that you might be able to use to your benefit.
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