How to Assess Your Business Insurance Risks

As a small business owner, the thought of something like a fire or theft worries you. While you don't want to have to pay too much towards insurance, you also can't sit back and do nothing if your business is at risk. Risk is a big factor in determining the success of many companies and yet many business owners don't take the time to assess what their most likely risks are or what to do about them. That could be a risk in itself, especially when considering business insurance for your company.

How Insurance Companies Assess Risk

It's nearly impossible for most people to know how much risk any specific company presents unless you have really taken the time to sit down with your insurance agent or another risk management professional. Insurance companies, though, will consider risk before issuing a business insurance policy. This process is better known as underwriting. It's a process in which insurance companies take a long look at your application for insurance and then consider if they can provide the coverage you've requested.

Many factors play a role in how much risk is present, and this can change over time. To establish the premium, or the amount of money you'll pay for insurance plans, considers factors such as:

• Your business type and industry
• Your business's location
• The type of building you operate in
• The local fire protection services
• The amount and type of insurance you want to buy

From these factors, the insurance company sets a premium to charge you. You can reduce this premium cost by taking some of the risk on yourself. To do this, you can increase your deductible, or the amount you'll pay first before the insurance company pays out on a claim. However, you shouldn't create such a high deductible that you cannot afford to pay it in an emergency.

What Other Risks Do You Have?

From your standpoint, you'll also want to consider your own risks. When buying business insurance, remember that you need coverage that is going to give you peace of mind and keep your company operational. Talk to your agent to determine what type and amount of coverage is necessary to reduce your risks. This step isn't one to avoid. A policy customized to your company is going to offer far more protection than one that's not.