Insurance premiums aren't arbitrary. Six core factors determine what you pay — and understanding them helps you buy smarter and reduce your cost over time.
The single biggest driver. A roofing contractor pays 10x more than a bookkeeper for the same limits because the probability and severity of claims is vastly different. Carriers classify risk by industry (SIC/NAICS codes).
For GL, higher revenue = more business activity = more potential for claims. Workers comp is calculated directly on payroll. As your business grows, your premium grows with it.
Three to five years of claims data follows your business. Frequent or severe claims signal higher future risk. A claims-free record earns you discounts and better carrier selection.
Higher limits cost more. Moving from $1M/$2M to $2M/$4M typically adds 20-35% to your premium. Higher deductibles reduce premium but increase your out-of-pocket on claims.
Urban markets with higher litigation rates (CA, NY, FL) cost more than rural markets. For property insurance, wildfire, flood, and wind zones significantly affect rates.
Newer businesses often pay more — less operating history means more unknown risk. Companies with 5+ years of steady operation with no claims earn favorable treatment.
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