As a business owner, it is vital to ensure that you are properly covered in case anything goes wrong with your operations. As a retailer, you must be prepared for theft, liability claims, and accidents. But how much insurance do you really need? How much should your average payout be, and how often should these incidents really be occurring? Take a look to see how your business compares to retailer averages.
Cost of Insurance
The amount you should spend on insurance depends on the size of your business and what type of products you sell. For example, if you sell heavy equipment, you may want to have slightly more coverage than if you sell clothes, as there is a higher level of risk. The average small retailer purchases either 500k-1m or 1m-2m general liability insurance plans, for an average cost of $500-$1000 per year, with a fairly high deductible. They will spend between $400-$6000 a year on property insurance (depending on the size of the store and amount of inventory), and an average of $430 per employee for worker’s compensation insurance. Of course, large corporations that span the country could spend hundreds of thousands on their insurance plans. For more information on the types of insurance a retailer can obtain, read this article about retail start up costs.
Average Payout on Claims
The cost of a claim varies depending on the type. For example, a theft claim is estimated to be around $8,000 in damages, a slip and fall payout can be around $20,000, a fire results in an average $35,000 of losses, and a vehicle accident could be $45,000. Depending on the balance between your premium and deductible from your insurance company, you could be responsible for some portion of these costs.
Occurrence of Claims
Burglary and theft is the most common type of claim for retailers, impacting 20% of small businesses in the last five years. An estimated 7% of annual revenues are lost to theft. Other studies have shown that 42% of inventory loss is caused by employee theft, even more than that of shoplifters. Retailers annually lose $45 billion to inventory shrinkage, so the problem is extremely common. 10% of small businesses have dealt with fire damage and customer slip and fall.
So, how’d you do? If your business seems to be underperforming compared to some of your counterparts, don’t worry: there are steps you can take. If you seem to be either underinsured or overpaying for your insurance, contact your broker to see if there’s anything they can do. There are also options to deter stealing, as can be seen in this post on reducing retail theft.
If your occurrence of claims seems way higher than the industry average, maybe it’s time you start doing something about it! Risk management software can go a long way in analyzing your claim history, allowing preventative action and saving you thousands of dollars by avoiding claims. Take a look at ClearRisk’s product page to find out what benefits we can bring to your retail business.