How Are Commercial Policies Rated, Deductibles Selected, and Premiums Developed?
• A: The way a policy is rated determines how the policy premium is developed. Rating factors vary based on the line of insurance you are purchasing. If you are purchasing commercial property insurance, the building rating formula is based on factors including square footage, type of construction, sprinklered or non-sprinklered, and the fire protection classification. If you are purchasing general liability insurance, the rating formula can be based on square footage, payroll, or gross sales depending on the general liability classification codes used. These are known as rating exposures. • Once the rating exposures are identified and the deductibles selected (usually from information you have provided on the application), the premium is calculated by a simple formula: rate x exposure = premium. The deductible amount you choose will be calculated in the rate. The higher the deductible (the amount you choose to self-insure) the lower the rate. By utilizing higher deductibles, you can br
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- How Are Commercial Policies Rated, Deductibles Selected, and Premiums Developed?
