What Factors Determine the Cost of My Business Insurance?

What Factors Determine the Cost of My Business Insurance?

What Factors Determine the Cost of My Business Insurance?

Here’s an overview of some factors insurance companies consider:

  • Cost is influenced by industry, location and the value of your business property. 
  • Different industries face different types and levels of risk. 
  • Your management practices can help control these risks. 
  • The amount of coverage depends on what you have to protect. 


Q: My business is going to launch in few weeks — so I’ve started shopping for insurance. I’m not sure what to expect in terms cost or even how to compare quotes. What exactly are business premiums based on? 


Joel Brekken is a Farmers Insurance® agent in Duluth, Minnesota. He discusses what affects the cost of business insurance.

A: The first thing most insurance companies look at is what type of business you have. Is it a restaurant or retail store? Are you an independent contractor or a trucker? Each industry carries a unique set of risks. If you own a place that’s open the public, you’re probably going to want more liability coverage than an IT consultant who works over the phone and internet.

They also look at your management practices, like closing procedures, employee safety training and how money is handled and deposited. Insurers are interested in knowing what measures you take to limit risk.

Your physical location matters as well. Some areas have more traffic accidents than others. Some are more susceptible to certain kinds of weather. The nearest fire station could be around the corner or 20 miles away.

The value of your business property is another major factor. The amount of coverage you’ll want is based what you have to protect — buildings, inventory, equipment and vehicles. Your coverage should reflect the cost to replace these assets, so your business can recover from a loss. 

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