When you're shopping for business insurance, knowing how insurance companies set prices can help you to know when you're getting a good deal, as opposed to when you need to keep looking.
Here are some of the biggest factors insurers consider.
Your industry is one of the biggest driving factors in your insurance rates. What you do directly affects how likely it is that you could cause harm to others and have an insurance claim filed against you.
For example, construction work often creates direct hazards for people walking around your jobsite. Poor work can later lead to fires, building collapses, or other damage. If you're an attorney, your risk of causing physical injuries is low, since you're mainly talking to people and filling out paperwork. But if you make a mistake, it could potentially cost your client thousands, or even millions of dollars. If you're a photographer, your chances of causing physical injury or any financial harm (beyond your pictures not coming out on time) are both low.
The size of your business is also a key factor. If you serve thousands of customers, instead of dozens, there's a higher chance that something will happen to at least one of those customers. Similarly, if you hire dozens of employees, instead of doing everything on your own, there's a greater chance that you make a poor hiring decision or that someone won't exercise the same care that you would.
Business insurance companies also look at your business on an individual level. This works similarly to car insurance. If you cause multiple accidents, the insurance company will decide there's a high risk of you filing a claim again. And they might increase your premiums. If you never have claims, the insurance company may reward you for taking steps to reduce risk.
The higher insurance limits you need, the more you will pay. Your insurance premiums are, at a very basic level, a percentage of what the insurance company expects to be required to pay out on your policy.
If you select a lower deductible, you will pay less. That's both because the amount your business insurance company will potentially have to pay out will be lower and because you'd be covering claims up to your deductible on your own, instead of through insurance.