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Business insurance calculators are a new phenomenon that business insurance providers use to give potential clients an estimate as to how much they can expect to pay for the level of coverage that they need. The program is typically a multi-variable algorithm that takes inputs such as net income, operating costs, and recovery time and calculates an estimate of how much you need to be covered for. Depending on the program, it may also allow you direct quote estimates as a function of the previously estimated minimum, and your personal risk tolerance or need.

Many insurance providers provide these resources through their websites. One of the best business insurance calculators is the Safeco calculator, which provides an interactive insurance calculator that provides you with a good estimate of your minimum coverage needs. Based on your income statement from last year, the calculator requires the following variables: net income before taxes, total operating expenses, direct labor / factory overhead costs, deductible payroll expenses, and estimated recovery time (which refers to the amount of time in months it would take for your business to fully recover from a worst-case scenario. A minimum of six months is required), and optional extra expenses. All of these categories have two columns: one for the past year and one for the projected upcoming year. The output is the sum of the net income and expenses less the deductions, multiplied by the amount of years (expressed as a fraction based on the number of months needed for recovery). The total reflects the amount of a “worst-case scenario” that you, as a business person, should be prepared to lose.

Business insurance calculators have, of course, always been around in some form or another since the creation of the industry, but their availability to the average consumer for price-comparison purposes is a new development that has come about from the information age. For the first time in history, business insurers can provide consumers with a practical tool that enables them to realistically estimate their premium costs without having to meet with or even exchange a phone call with an insurance representative.

This Business article was written by Mark Karavan on 12/19/2009