Percentage Deductible – In commercial property insurance, a percentage based on the total value of the property that is being covered.Flat Deductibles – A settled dollar figure that is the same no matter the covered event.Typically, there are three primary forms of deductibles: In most cases, general liability insurance policies have low (if not zero) deductibles, while professional liability insurance and commercial property policies will have deductible choices. The deductible, as well as the policy limits (the maximum amount the insurance company will pay per covered event), constitute a form of risk-sharing between the business and the insurance provider. It is the number that you and your insurance company agree upon as the out-of-pocket expense you are responsible for when a claim is paid. What is a deductible?Īn insurance deductible is a term related to the payments made on your liability insurance policy. This could result in the loss of customers or violation of contractual requirements. However, after a certain point, the policy will be canceled and your business will be exposed to financial risk due to third-party liability, and potential property loss. Typically, after the premium due date has passed, there is a grace period in which you can pay what you owe. If you miss a payment, your insurance company will warn you before eventually canceling the policy. It’s important to stay current with your premium payments. On the other hand, someone who takes photos and videos might have little interaction with third parties and fewer inherent risks as they don’t work with dangerous tools and equipment. To explain why, consider the difference in working conditions: contractors often work at locations that expose them to the potential of causing injury to their workers or others, and they are also at greater risk of damaging others’ property. For example, a contracting and construction business that employs subcontractors will pay higher premiums for general liability insurance and workers’ compensation than a one-person photo and video business. High-risk industries will pay higher premiums, while low-risk industries pay lower premiums. Your revenue base and asset-to-liability ratio (for some lines of coverage)Īll of these elements help build a risk profile and help determine your insurance premium.Policy riders (additional coverage purchased on your policy).There are a variety of factors that can impact how premiums are determined, including: It’s important to pay your insurance premium according to your contract or you could risk a lapse in coverage. As is the case for most continuous policies (those without a lapse in coverage), you will need to pay the premium on a monthly, quarterly, or annual basis. Your insurance premium is the price you pay for your insurance policy. deductibles, how deductibles affect your premium, and the pros and cons of having higher limits or deductibles. Below, we will cover everything you need to know about insurance premiums vs. Understanding what they mean will help you make better insurance purchasing decisions for your small business. Let’s start at the beginning with two of the most important terms: premiums and deductibles. As a small business owner, you have many tasks on your to-do list, but reading an insurance dictionary to understand the terms of your policy doesn’t have to be one of them.
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