Year over year, commercial insurance premiums continue to rise. Whether you are looking to save money on business insurance or just want to learn how to compare small business insurance quotes, we’ve put together a step-by-step guide to make the process—which involves understanding what coverage you need, thinking about limits, and researching the insurer’s reputation—easier for you. Understanding how to compare insurance quotes is crucial, because cheaper doesn’t necessarily mean better.
Step 1: Understand What Coverage You Need
Before you start comparing business insurance quotes, it’s smart to think about what type of policy you need for your business. Some of the more important coverages to consider include:
- Workers’ compensation: This type of insurance helps employees who are injured or fall ill as a result of their work. Business owners can also opt in for this coverage. Workers’ compensation is required in nearly every state.
- General liability insurance: This is the most common and broadest type of liability coverage. It protects your business’ financial assets from claims that a third party was injured or had property damage due to your business’ negligence. It also helps with premise liability, sometimes product liability, and personal and advertising injury.
- Commercial property insurance: You purchase this coverage if you own a building or significant commercial property. There are other types of property insurance like business personal property (BPP) and inland marine insurance.
A common policy offered by providers is a business owner’s policy, commonly called a BOP. A BOP is a combination of commercial property and general liability insurance. Providers usually include business loss income in a BOP too, which provides financial assistance to your business if it cannot open due to a covered loss. One advantage a BOP provides is in bundling multiple types of coverage in one policy, which is typically more affordable than buying the policies separately.
Step 2: Determine What’s Covered & What’s Not
Once you’ve zeroed in on what coverage is right or required for your business, you’ll need to understand how coverage works and what type of agreement you are entering into.
Insurance is a contract. In this contract, you agree to make monthly payments and the provider agrees to pay for covered events. While that contractual exchange may sound simple, you should also consider the payments, the limits of coverage, what is covered, and what is not, as these factors can influence whether a contract is worth purchasing. Fortunately, much of this information can be discovered before agreeing to the contract.
Exclusions & Endorsements
During the quote process, most providers will share a list of exclusions. An exclusion is a specific listed activity the insurance company will not cover if a claim results from that activity.
The provider may not specifically call these activities “exclusions.” So, when comparing business insurance quotes, look for places in the policy description that list activities you must agree not to participate in or a prominent callout from the provider on what’s covered and not covered. This section will often lay out the exclusions and listed coverages for the policy.
We have a list of common general liability insurance exclusions that may be of interest to you.
Many years ago, when I was first learning to be an insurance adjuster, I was taught to see an exclusion as a “takeaway”—where coverage is taken away. Sometimes you can regain coverage taken away by an exclusion through an insurance endorsement, which is coverage an insurance company can add to your policy in a modified form for an extra cost.
When comparing business insurance policies, pay special attention to endorsements. An endorsement can make or break whether one quote is right for your business vs another quote.
For example, let’s say you are a handyman and you’re looking for general liability and inland marine coverage for your tools and equipment. You get three quotes: two for general liability and one for general liability with an endorsement for your tools and equipment. While the first two may be more affordable, the third option with the endorsement offers more complete protection for your business.
Step 3: Think About Coverage Amounts & Limits
Once you know the type of coverage you need, and what is and isn’t covered in the policies you’re comparing, the next thing to consider is the amount of coverage you will need. This consideration is often referred to as the limits on the policy.
During the quoting process, the provider will display limits like “$1 million per occurrence and $2 million aggregate.”
- The per-occurrence limit refers to the total amount covered by the policy per occurrence (think claim).
- The aggregate limit is the total amount the policy covers during the policy period.
So, if you have a covered loss that costs $550,000, this amount is under the $1 million per-occurrence limit. This amount would also eat into the overall aggregate limit, leaving $1.45 million remaining for other losses.
When comparing insurance online, most carriers will offer a policy with a predetermined limit and won’t provide much flexibility for changing it. However, some carriers will let you update the limit online. If that isn’t an option for you, higher limits are almost always available if you call and speak with the carrier’s representatives.
Step 4: Consider the Deductible
An insurance deductible is an agreed-upon amount you will pay whenever a loss is covered. It is similar to a copay for a health insurance policy—when you use the insurance, you’ve got a financial responsibility.
The deductible is one area of business insurance you can customize. Providers usually offer deductibles in different amounts, from low to high, that you can select for your policy. The premium usually has a direct relationship to the deductible: the higher the deductible, the lower the premium. So, if you have a $500 deductible on a BOP, the premium will likely be more expensive than if you have a $5,000 deductible.
Unless you have purchased a specialized endorsement, the deductible applies for each loss. If you file three claims during the policy period, you will need to pay three deductibles.
Step 5: Research the Company’s Reputation
Even though this is Step 5 on the list when asking the question of how to compare small business insurance quotes, the reputation of the company should play into your decision.
There are two main components to consider that make up a business’ reputation: financial rating and customer satisfaction.
Financial Rating
Make sure the company you’re considering has a strong financial position so it can pay your claims. AM Best is a trusted financial rating system for insurance companies. The best ratings for a company are A- to A (Excellent) and A+ to A++ (Superior).
Insurance companies can become insolvent. When this happens, the responsibility of paying the claim usually falls on the state, and state governments work to make sure admitted carriers are all financially stable. Nevertheless, it is wise to be familiar with and purchase a policy from a carrier with a healthy financial rating.
Customer Satisfaction
There are several ways to measure a carrier’s customer satisfaction. First, insurance carriers have an assigned code from the National Association of Insurance Commissioners (NAIC). By searching NAIC’s database with this code, you can see how many complaints are filed against that company with state governments.
The other way to research a potential insurance company is through online reviews. Sometimes these reviews are published on the provider’s website, or they can be found on third-party sites like Trustpilot.
We have also reviewed many small business insurance companies, managing general agents, and brokerages:
Step 6: Ask About Services the Provider Offers
While you may not immediately think of it, insurance companies often offer several services either automatically with the policy or as a service to their customer. Being familiar with these offerings can help you effectively compare which provider is better to purchase insurance from—especially if their prices are similar.
For example, Hiscox is a great provider of cyber liability insurance. When you purchase a cyber insurance policy from Hiscox, you get access to free information technology (IT) vendors that can help train your company. So, if you are a very small company—let’s say only one to three employees—this vendor can conduct IT security training to make sure everyone is aware of how to spot a phishing email. This type of service may automatically come with a policy.
Other companies employ risk engineers to help you ensure your workspace is safe and decrease the likelihood of a claim for workers’ comp. They might offer a variety of medical and pharmaceutical services for injured employees to help streamline the claims process.
Another factor to consider is the carrier’s availability. Does it run a 24/7 claims hotline? Having once worked a second shift (and weekends) in the claims department, I know first-hand how important it is for a small business owner to be able to reach out to their carrier and initiate a claim late on a Saturday night.
Finally, another service you may not automatically think about—but should consider—is who will be handling your claims. The reality of insurance is this: you purchase insurance so that when a loss occurs, the carrier will handle the claim.
While most providers handle claims in-house (meaning the adjusters are the carrier’s own employees), some do not. Instead, they utilize a third-party administrator (TPA) to handle the claims.
The downside to working with a TPA becomes apparent if a dispute arises with coverage—how does that get handled? Does the carrier step in, or do you have to work with the TPA to try to resolve the claim? Make sure to consider this element when comparing business insurance quotes.
Step 7: Purchase Small Business Insurance
Once you’ve finished comparing business insurance quotes, it is time to buy. You have multiple options for purchasing insurance at this point in the journey.
Insurance is available through a variety of channels. The most common and familiar is through the local agent. If the agent is independent, they can help you compare quotes. In contrast, captive agents work for only one carrier, so if you’re hoping to compare quotes, you’ll want to go another route.
A broker is the best way to compare small business insurance quotes. A broker can obtain multiple quotes from different providers and also has the knowledge and advice an agent possesses.
Many providers will also sell insurance directly to customers without using a broker or agent. This is often a great way to save money and find cheap general liability insurance.
Bottom Line
With insurance premiums on the rise, there are multiple advantages to comparing small business insurance quotes. Through the process you can gain a better understanding of what type of coverage you need, the limits appropriate for your business, and the services a provider offers. And as a bonus, you may even save some money too!
To compare business insurance quotes, we recommend starting with Simply Business, an online digital broker. Simply Business works with multiple top-rated small business insurance carriers and offers all of the essential, core small business policies.
In 10 minutes or less, Simply Business will generate real-time quotes that you can then customize by adjusting the limits. It provides key information on the providers, such as its AM Best rating, and allows you to purchase policies online. If you prefer, you can call and speak with a representative to get more information before deciding to buy.
