Premium

A premium is the cost of your small business insurance protection. You pay it initially when you purchase your coverage and then periodically to keep your insurance active.

Insurance premiums can usually be paid monthly or annually, depending on the insurer and policy.

• Annual payments are often cheaper overall and may include discounts.
• Monthly payments spread out the cost but may include installment or finance fees.

Paying the full premium upfront can lower your total insurance cost, while monthly payments offer flexibility for cash flow.

If you don’t pay your insurance premium on time and before your grace period expires, your insurer may cancel your coverage. This will leave your business exposed financially if it suffers property damage, a lawsuit, or another insurable event.

By paying your premium for insurance policies, such as general liability or workers' compensation, you'll have a financial backstop in place to protect your business against the potentially devastating impact of a major incident.

If you miss a premium payment:

• Your policy may be canceled
• You could experience a coverage lapse
• Future premiums may increase because insurers view lapses as higher risk

Keeping your policy active helps protect your business and can keep your long-term insurance costs lower.

An insurance premium isn't the same as an insurance quote. A premium is the actual cost of your policy, which an insurer determines through a process called underwriting.

A quote is an initial estimate of your cost based on your answers to limited questions about your business. To receive your actual cost or premium, you need to complete a more detailed insurance application.

You can compare insurance quotes from top U.S. carriers for free online with Insureon. Simply fill out an application to get started today.

To determine your premium amount, your insurance company considers what type of small business insurance you wish to buy and how much coverage you are requesting.

The insurer will collect information about your business to determine your exposure to risk. For example, if you’re buying commercial property insurance, the insurer will want to know several details about your business, including:

• Type of building you’re insuring
• Location of your property
• Condition of your property
• Business personal property
• Type of HVAC system
• Fire protection / security systems

The insurer will also consider your insurance claim history. It will seek to determine whether you’ve used your insurance frequently over the years. If so, you could be considered a costly business to insure, meriting a higher premium.

Each type of insurance has different factors to determine pricing. For example, the cost of general liability insurance is influenced by at least eight factors and several considerations will affect your premium for commercial auto insurance.

Your premium isn’t always the only cost on your insurance bill. Depending on the policy, you may also see:

• Policy or administrative fees
• State or regulatory taxes
• Optional endorsements or add-ons
• Inspection or filing fees

These charges vary by insurer and state, but they’re important to factor in when comparing quotes.

Insurers typically employ actuaries to make premium calculations. Actuaries often major in business or quantitative fields as undergraduates. They take nine intense actuarial exams over a six- to nine-year period. If they pass, they become a certified actuary.

Your premium will remain the same for the entire policy period. However, when your coverage comes up for renewal, your insurer may opt to increase it.

Your carrier could increase your premium due to claims prior to your renewal or because of financial pressures caused by a catastrophic event or another widespread insurable event.

However, in many states, insurance commissioners have the power to constrain premium hikes. By statute, they require insurers to file their premiums for approval before applying them to their customers.

While insurers calculate premiums based on risk, small business owners can take steps to reduce their costs, including:

• Improving workplace safety to reduce claims
• Maintaining a clean claims history
• Bundling policies, such as a business owner's policy (BOP)
• Choosing higher deductibles when financially feasible
• Implementing cybersecurity controls for cyber insurance

Even small improvements—like adding security systems or tightening business practices—can help reduce premiums over time.

Insureon helps small business owners compare commercial insurance quotes with one easy online application. Start an application today to protect your business against legal liabilities.