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7 Bad Practices That Hike Your Commercial Insurance Costs

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Kyle Jeziorski - Founder Shield
Kyle Jeziorski

Broking Manager

If there’s one constant in life (and business), it’s the concept of change. Your company has likely experienced several stages of change throughout its course. From infancy to multiple funding rounds to a potential initial public offering (IPO), growing means changing. However, expanding and developing doesn’t mean caving to skyrocketed overhead costs — but it can quickly happen. Here’s a look at some unfavorable practices that will cost your company a pretty penny and how to avoid them to keep your commercial insurance costs manageable. 

1. Foregoing Employee Training

Workers who are improperly trained often cause accidents and mistakes. Unsurprisingly, work-related injuries and lawsuits against your company frequently follow the decision not to stay current on employee training. From fatigue to accidents to overexertion, most work-related injuries are avoidable with training and awareness.

And it’s not always merely teaching employees the ins and outs of their job, although that aspect is crucial, as well. More than anything, your workforce must stay up to date with ongoing social, political, or legal changes. In short, noncompliance is nothing to shrug off. 

Additionally, keeping your employees safe is necessary. Keeping employees educated on new procedures, equipment, or processes is a primary path to accomplishing fewer workers’ compensation insurance claims. Remember, your past incidents usually reflect in your future premium. In other words, the more claims history you have, the more likely your commercial insurance costs will be.

2. Keeping Scanty Records

Record-keeping isn’t always a bowl of laughs, but it could grant you discounts that will make the dreary task worth it. Most insurers offer discounts to those with sufficient risk management programs. However, there is one caveat; you must prove it. 

Whether it’s employee training, as mentioned above, or equipment maintenance, your records must show that you performed these required activities. Without adequate records, the insurer won’t likely offer the discounts, leaving your commercial insurance costs to suffer.

In the context of determining when a risk should be avoided, it becomes crucial to maintain meticulous records, especially if you ever find yourself embroiled in a legal dispute. Without comprehensive documentation, the task of revisiting previous training and risk management procedures can be exceptionally daunting. Furthermore, you’ll be required to substantiate these actions in a court of law and before the Occupational Safety and Health Administration (OSHA) when involved in a legal case.

3. Disregarding Particular Risks

Companies face specific risks due to several factors: industry, location, size, etc. While some risks may not be avoidable, businesses should consider each vulnerability as crucial as the next. This approach means identifying business risks honestly. For example, a company won’t face the same risks in North Carolina as in Arizona or Alaska. Geographic location matters. 

Consider exposures related to geographic location, such as earthquakes or windstorms. What about civil unrest and vandalism? Some places in the world are prone to these biological and social activities more than others. Ignoring separate exposures only puts your business at a higher exposure to experiencing damage or loss. 

Insurers don’t adhere to the mindset that a loss won’t happen to you “because it just won’t.” Instead, they will examine your loss history, including regular risks and whether or not you’re managing them appropriately.

4. Regulation Noncompliance

Sliding under the radar of the law could save you a few bucks in the short run. However, it will undoubtedly hurt your bottom line in the long run. Your company must come into compliance with federal, state, and local laws. Skirting these regulations will impact your commercial insurance costs significantly. 

Fines, jail time, stop-work orders, and other penalties could ensue if you decide not to comply with laws. And insurers take these mistakes incredibly seriously. Your premium will skyrocket if you carry an “outlaw-type” of reputation. Coloring outside the lines is phenomenal for the creative process, but it will hurt you when it comes to legal compliance.

5. Self-Insuring With Inept Resources

A bonus with self-insurance is that premiums rarely exist the same as with a traditional insurer. While this strategy might seem fitting and budget-friendly at the time, it’s often the more costly route if your company doesn’t have adequate self-insurance resources. 

Keep in mind that this approach doesn’t necessarily raise your premium prices, but it costs you significantly in general  insurance expenses — so we’ve included it on our list. 

That said, if you decide to switch from self-insurance to a traditional carrier, you may very well pay more for insurance than you would have otherwise. Self-insurance is a risky choice for businesses that aren’t 100% capable of covering their losses, large or small. 

6. Opting for Insufficient or No Coverage

If you’re like most company leaders, purchasing insurance is high on your priority list. However, some professionals take a different approach, following the strategy that no coverage or premium is an excellent money-saving strategy. After all, why buy a policy when you’ve never experienced a loss before? 

Lamentably, this approach is a massive mistake. It’s what many insurance experts call gambling with your future, the roulette of risk. 

Besides, gaps in your insurance coverage make your company unattractive to insurers. You may pay more for coverage than other companies. Remember, insurers would much rather cover a business with a steady history of continuous coverage, no matter or not if it’s peppered with claims. Commercial business insurance displays a level of responsibility and trustworthiness that insurers are more willing to get behind.

7. Choosing an “Outlier” Insurer

Aside from buying inadequate or no coverage, another pitfall of purchasing commercial insurance is choosing the wrong insurer. Sometimes the big players don’t always fit your business flawlessly or even cater to your industry. The same goes for smaller insurance carriers. Sure, they might know some generic risks but do they know your market inside, outside, and upside down as you do? 

Look for an insurer with coverage specifically tailored to your industry. Naturally, the insurer you  choose needs to be financially stable with a solid history of providing excellent service, and it must be licensed in your state. 

Understanding the details of what coverage your company needs can be a confusing process. Founder Shield specializes in knowing the risks your industry faces to make sure you have adequate protection. Feel free to reach out to us, and we’ll walk you through the process of finding the right policy for you. 


If you’re interested in learning more about a customized insurance program, please reach a member of our team by phone at 646-956-5140 or email at info@foundershield.com or create an account ​here​ to get started on a quote.

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