What is Minimum Premium, or oftentimes abbreviated MP, in Business Insurance? It's an excellent question. Simply put, it's the least (or minimum) amount the insurance company charges in premium to write the policy. For some business classifications, it could be as low as $250 and for others it could be as high as $30,000. The bottom line, it's their minimum premium. It could apply to any type of insurance and is usually brought up when presenting a quote, increasing or decreasing property coverage, or decreasing or increasing gross sales.
Lets look at an example on how it can apply to Business Personal Property. Insured starts a new business and moves in. At the time, they don't have a lot of property coverage because it's just a professional office. They grow and add more people, furniture and inventory. Knowing they need to add coverage for property, they call their agent to add Business Personal Property. Agent adds it and premium doesn't go up. Customer is happy because premiums didn't increase and they got more coverage. Looking at it from the other way, though, might not be as favorable. Customer downsizes and wants to lower coverage. Agent lowers Business Personal Property, but insured is still at Minimum Premium (MP), so there's no decrease in premium.
Minimum Premium can also be a topic conversation when it comes to gross sales. As we've discussed before, gross sales is one of the key factors that can impact premium. Lets say Minimum Premium for a policy is $5,000, and gross sales are at $250,000, what if you only do $100,000 in gross sales? Will there be return premium? No, because MP is $5,000.
It's always important to ask about Minimum Premium, so you can manage expectations. If you have any questions about Business Insurance and Minimum Premium, please feel free to contact me.
Commercial Insurance Agent
Let's face it, insurance agents can ask a lot of questions. Sometimes, it may seem like too many. I can assure you, these questions are extremely important, and in most cases, are being asked by an underwriter from one of the insurance companies. Independent insurance agents, like us, represent many insurance companies when dealing with Business Insurance, which means we will probably be asking more questions than if you were to call a captive agent or an insurance company directly.
I know a lot of business owners tell me, "why do they ask so many questions?....I've never had a claim". Think about it this way, as a business owner, if you were going to put a $1,000,000 on the line for another company, what kind of questions would you ask? Now, I know the insurance company isn't giving you a loan, but they are determining whether or not they want to cover your business and defend your business in court should it come down to that.
In addition, these questions can help determine coverage that is needed for your business. In some cases, businesses are getting a certain type of Business Insurance because it is required. This is fine, but sometimes, what is required isn't necessarily what is needed. It's important to understand why you are getting insurance.
Some of the questions might seem redundant and might not seem relevant to your business, but if you are getting Business Insurance and the agent isn't asking questions, I would be concerned. If I can help with any Business Insurance needs, please let me know.
Business Insurance is probably the last thing you're thinking about when it comes to your startup, but it's something you should consider. Here are a just a few reasons why:
Being a startup, money might be scarce, but Business Insurance is something that can save your business. Give us a call to see what coverages are available for your business. We would love to hear about your startup.