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What Factors Affect the Cost of Business Insurance?

Now that we've outlined how you can get lower rates, you may want to know the other factors that go into determining the cost of business insurance.

  • The number of employees / independent contractors you have. The more people who work for you, the higher your liabilities for E&O, General Liability, and Workers' Comp Insurance.
  • The amount of sales your business does. The more money your business takes in, the higher the stakes for a potential professional liability lawsuit.
  • The type of IT services you offer. Do you work onsite at clients' offices? Do you travel around town for work? Around the country? Do you work with businesses that have a lot of sensitive data? Variations like this in the type of work you do can increase or decrease your premiums.
  • The state you operate in. In addition to meeting different state requirements, your coverage will change in order to reflect your state's laws. According to the U.S. Small Business Administration, some states tend to award more damages for personal injury lawsuits. If your state is more "lawsuit-friendly," you may have to pay a higher premium.
  • Your claims history. As you would expect, businesses that have filed insurance claims in the past usually have to pay a higher premium for coverage.
  • The contracts you've signed. Your contracts and your work history will naturally affect your Errors and Omissions Insurance. If you purchase a policy with Prior Acts Coverage, your insurer will want to see your previous contracts and the kind of work you did in the past.

To get a better idea of how an insurance policy might look for your IT business, check out our sample insurance quotes page, which includes a sample insurance quote for independent IT contractors.

Next: How Should You Get Coverage: On Your Own Or Through A Broker?

70% of businesses raise prices or cut hiring when sued