Crime rates, natural disaster risk levels, and other factors contribute to location-based variations in insurance costs
Location, location, location may be the oldest saying in real-estate– but it applies equally to business insurance policies as well. Location is one of the most influential factors that insurance companies use to calculate the potential risks of owning a business– and the riskier the area, the more expensive the insurance.
Typically, threats to a business can come in two forms: crime and natural disasters. Both can be devastating, expensive to recover from, and can sneak up on a business owner at any time– which is why a proper business insurance policy is essential. However, choose the wrong location for your business, and you’ll be stuck paying way more for your policy. Choose a good one, though, and you could save serious cash while making your business much safer in the process.
Natural disasters that affect insurance costs are much more likely to occur in some locations than others
Hurricanes, flooding, tornadoes, and earthquakes can do serious damage to almost any business– but the risk of these disasters is not evenly geographically distributed. Atlantic coastal areas are at the highest risk for hurricanes, floods, and similar disasters, while more inland areas face greater risks from tornadoes. In addition, areas near fault lines, such as the famed San Andreas Faultline in California, are much more likely to experience earthquakes than other parts of the country.
Area crime rates, as well as the type of business, can also affect business insurance rates
Along with natural disasters and other so-called ‘acts of God,’ theft, break-ins, and vandalism are among the most commonly occurring threats to businesses– and the cost of business insurance policies are often tied to the potential threat of crimes occurring at a particular location. Urban areas typically see greater crime rates than suburban or rural locations, so if your business is city-based, especially if it’s located in a big city, it could mean a big increase in insurance costs.
Insurance companies will often closely examine the neighborhoods around your business to determine an exact insurance rate, so even if the area in which your business is located is relatively safe, if you could see a price hike if the area is adjacent to a bad neighborhood. Therefore, if you’re looking to open or move your business’s location, you’ll want to check comprehensive crime data records from all areas within a few miles of your business to make an informed choice.
Additionally, you may want to examine crime trends in the area; if crime is decreasing and property values are increasing a neighborhood, it may be a good long-term location for your business– and you might even see insurance rates fall in the coming years. In contrast, if crime in an area has been increasing for the last few months or years, it could be an ugly warning of a good neighborhood turning bad– and increased business insurance rates could soon follow.
Some types of businesses face greater risks from crime, especially in specific locations
While location is an essential factor in determining business insurance rates, it’s not the only one. The type of business you’re in can also be a big factor, especially when judged alongside the business’s location. For example, jewelry and liquor stores are particularly susceptible to robberies, hold-ups, break-ins, and other theft-related crimes, especially when located in low-income or high-crime areas. Therefore, the combination of a high-risk business in a high-risk area can sometimes lead to significantly higher insurance rates.
While high-risk stores, including those carrying valuable products, commodities or equipment, would likely face higher insurance rates no matter their location, being in a bad area can easily amplify– if not multiply, the amount of risk they face from criminals. Therefore, business owners looking at opening or moving their business’s location should be especially careful if they own a high-risk business.
Do significant research before making the decision to buy, lease, or rent a new location for your business
While property in a lower-income area may be more affordable than locations in safer, upscale areas, higher insurance rates could make the lower income location more expensive. Therefore, don’t simply compare costs of rent or purchasing property for your business, look at the combined costs of rental/purchase and insurance. The results just might surprise you– and let you save money in ways you didn’t expect.
To learn more about how to save money while protect your business from a variety of threats, contact Avante Insurance today for a free consultation.