Business liability insurance is an important part of any business insurance risk management plan. Liability insurance can be one policy or several different policies addressing specific risks related to your business, such as liquor liability insurance.
A general commercial liability policy is designed to manage the risk of injuries to employees and/or customers and to cover the costs of such injuries. It makes sense then that the policy premiums for such a policy increase if your business location is more prone to such risks.
A recent web article I reviewed pointed out a number of factors that effect premium rates. Among those factors:
- Geographic Location - Large urban areas typically have a higher crime rate than suburban locations. Urban areas may increase the likelihood of violent crime against an employee or customer. But more often it is vandalism and petty crimes in the area that raises premiums.
- Type of Structure and Surrounding Structures - Generally, "newer" construction, built up to modern codes and with consideration of accessibility and safety, lowers liability rates. Older construction, with flammable materials in an area with similar structures and with a lack of accessibility, raises liability rates.
- Accessibility to Emergency Services - Can you call 911 from your business location? What is the response time for emergency services? Is there hydrant access and medical facilities nearby? A lack of access may affect your rates.
- High Traffic Areas - High traffic areas are a must for some businesses. But, high traffic areas increase the possibility of injury and, thus, raise premium rates.
- Lease Requirements - Every commercial lease is going to have a liability insurance requirement. Your lease may require higher limits than necessary or may require coverage for common areas and the parking lot.
- Neighboring Businesses - Your neighbors in the area may affect your premiums. Liquor establishments, fume producers (dry cleaners), and high fire risk businesses will raise your premiums because of the risk.
- Other Factors - Other factors inherent in the location will raise premiums. Sometimes those factors may raise premiums and require additional coverage. For example, a waterfront location will raise liability premiums and require a flood insurance policy.
Business owners often pick the "perfect location" without considering the potential insurance cost. Sometimes the premium differences can make the difference between a profitable business and one that fails. You can take steps to assess the premium costs:
- Read Your Lease - Insurance requirements in your lease are not optional. The requirement is mandatory and the minimum necessary coverage to avoid eviction. So, before considering a location, read the lease requirements for insurance.
- Enforce Safety - Most insurers have discount programs for safe practices. Proper railings, slip proof flooring, surveillance and anti-crime measures, and a whole list of safe practices can lower risk and premiums.
- Law and Code Compliance - Make sure your business follows all applicable building codes, laws and ADA standards. Make sure your parking lot is lit with appropriate signage and line painting with clearly established pedestrian lanes of travel.
- Consider Alternatives - Consider alternative locations that have lower premiums. Often one or two streets off of the current "hot spot" can lower premiums.
- Talk to Your Insurance Professional - Your agent or broker can get you estimated premiums to consider at each location you review. Waiting until after the lease is signed to speak with your insurance professional can result in unforeseen premium costs.
Insurance premiums are part of the cost of doing business and should be a part of the consideration when choosing a business location.
