What are All Those Business Insurance Fees?

Everybody cringes at the dreaded four letter “F” word: fees.

Fees are an unavoidable aspect of life, but what if we told you when it comes to your business insurance, you could be paying for fees you shouldn’t be?

As an agency who has been around for a century, we have reviewed and worked on thousands of insurance policies here at Berry Insurance. So we have a good idea on which fees are mandated and necessary, and which fees are avoidable by working with someone who won’t try to sneak in extra charges.

In this article, we’ll go over all the fees you may see on your business insurance, what they cover, and whether or not they are avoidable.

Types of policy fees:

Built in fees:

When you review your business insurance you might freak out when you see all these extra “fees” included. But some of these fees aren’t even fees at all.

Many business insurance policies (especially workers’ compensation policies) have fees that are automatically included in your premium cost.

Examples of these on workers’ comp policies include:

DIA assessment fee: This fee is for two DIA funds (the Workers’ Compensation Special fund and the Workers’ Compensation Trust Fund) which pay or reimburse employees whose employer has no workers’ compensation. 

Terrorism fee: This is a fee mandated by the Terrorism Risk Insurance Act of 2002 (TRIA) that helps cover war-related injuries and fatalities. It is currently set at 3% of the standard premium. 

Expense constant: A flat, fixed charge to help cover administrative costs associated with writing a workers compensation policy. 

Brokerage fees:

If your insurance agent had to use a  brokerage to get you insurance, there may be some brokerage fees applied to your insurance policy.

For some classes of businesses with higher hazards or significant exposures, it’s hard to get insurance coverage through standard insurance carriers. In those cases, insurance agents will need to use an insurance broker to get access to other specialty carriers.

Usually those brokers will apply some fees for their work. Some of these may include:

Policy servicing fee: This is strictly an administrative fee charged by the brokerage for issuing the policy.

Inspection fee: Some insurance carriers will hire third party contractors to conduct their inspections. To reduce their costs, they pass on part of this to their insureds.

Surplus lines tax: This is a fee charged by the state for obtaining coverage through a surplus lines insurance company, which is one that is not licensed/admitted with the state. The fee is a straight 4% of the gross premium on any policy.

Agency charging servicing or administration fees:

When you review your policies, you may also notice servicing or administration fees. (Sometimes these can also be listed as risk management fees.)

Basically, insurance agencies may apply these fees as a way to make extra money for the work they did to help you get your insurance policy.

Not every insurance agency charges these fees, so it’s something to look for and consider when looking over your policies.

Understand your fees:

You should know exactly what you’re paying for when it comes to your business insurance. 

That’s why we recommend always thoroughly reviewing your business insurance policies when you get them.

Fees should always be clearly listed and easy to identify on your policy and your insurance agent should be able to transparently explain them to you.

Some fees (like the workers’ comp or brokered ones are unavoidable), but you should still be aware of what you are being charged.

Interested in learning about your billing options and how to avoid late fees? Check out this article: Your Insurance Billing Options: How to Avoid Late Fees and Policy Cancellations.

Work with a fee-free agent:

Remember, agencies get paid commission by the insurance carriers to help you get an insurance policy, so there is really no reason they should be charging you as well. (If we did this at Berry Insurance, we would feel like we were robbing our clients.)

So if you’re working with an insurance agent who is tacking on all sorts of extra fees (outside of the unavoidable ones), you may want to consider switching to an agent who has your best interests in mind.

For more information about what you should be looking for in a business insurance agent, check out this article: Why Your Massachusetts Business Insurance Agent Should Provide More than Just Insurance.