Why where your business is located can increase or decrease your insurance costs
If you own a business or are thinking about starting one, no doubt you’ve been told the importance of “location” when it comes to success. What you might not have considered is that your business’ location can also impact what you pay for commercial insurance.
How does location affect insurance rates? What factors can lower or raise your rates? Here are four questions to ask when considering buying or leasing commercial space.
4 location factors that affect commercial insurance rates:
- Likelihood of natural disasters in the area
- Level of crime in the area
- Property values in the area
- Type of business
Question 1: Is the area prone to natural disasters?
Natural disasters can include things like hurricanes, tornadoes, earthquakes, and floods. These forces can wreak havoc on entire cities and counties. Is your city or state more likely to be hit with one of these disasters? If you live along the east or Gulf coast, you should be ready for hurricanes and tropical storms at some point. California experiences frequent earthquakes. The Midwest regularly gets hit with tornadoes and floods.
All of these “natural” occurrences result in commercial claims, which means you will pay more for your insurance if your business is located in one of these areas.
Question 2: What is the crime rate in the neighborhood?
Natural disasters pose one kind of threat. People pose a different kind of threat. Break-ins, theft, and vandalism are a big problem for any business, but certain locations come with higher risks. You’re likely to see higher crime rates – and thus higher insurance premiums – in urban areas and big cities. If your area has property destruction, you might expect to see increased insurance rates, too.
Before setting up shop, do some homework on the area to determine crime trends and property values. Decreasing crime and rising property rates are usually a good sign that an area is growing. Opposite trends could be a sign that you should look elsewhere.
Question 3: What are property values like in the area?
Don’t think that choosing a location in a “nice” part of town guarantees lower insurance rates. Crime isn’t the only factor. The property values in an area will affect what you pay to insure a commercial space. Opening up in a high-end location means it may cost more to repair the property in the event of damage, for instance.
Here are three things to consider:
- What are the home values in the area compared to other locations?
- What are the listing prices of commercial spaces nearby?
- What are the average property taxes in the area?
Question 4: What type of business do you plan to open?
The type of business you operate and the industry you’re in can affect your insurance rates. Some businesses are more likely to experience robberies, break-ins, or theft. Liquor and convenience stores are particularly vulnerable to these kinds of crimes, as are jewelry and other high-end retail stores. Computer, electronics, and equipment stores are also frequent targets.
A combination of high-risk location + high-risk products will generally equal higher insurance premiums.
Do your homework before buying or leasing commercial space
Just like you do plenty of research before buying a house or car, it’s important to research a location that makes the most sense financially. A location in a lower-income area might come with a smaller price tag initially but look at long-term costs, as well. Combine the cost to buy/lease with ongoing costs like insurance payments. That combination could make a big difference in your bottom line for a long time to come.
Understand your specific insurance needs
Aside from property insurance – which covers the physical building/land and any equipment/merchandise inside – there are other types of commercial policies to consider.
Here are some types of commercial insurance you might need:
- General and professional/business liability
- Workers’ compensation
- Product liability
- Commercial auto
- Business interruption
- Cyber liability insurance
- Electronic data protection
- Employee practices liability
- Commercial umbrella
Avante Insurance is a family-owned and operated insurance agency in Florida. Contact us to talk about your commercial insurance needs and request a quote. We will ensure you have the right coverage to protect the business you’re just starting or have worked for a long time to grow.
This blog and website are made available by the publisher for educational and informational purposes only. It is not to be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state.