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How is the Cost (Premium) Derived?
Insurance companies have to charge you somehow. The cleanest and most logical way to charge you is based off of your anticipated gross revenue over a yearly period to coincide with your policy period. An axe throwing venue bringing in a million dollars in sales over a year period has a much higher exposure than an axe throwing venue with a hundred thousand dollars in sales and as such they should pay more.
To formulate your premium, an insurance company will take your anticipated revenue broken down by certain streams and multiply each by a specific rate. The streams are as follows:
Axe Throwing Revenue (or other entertainment such as laser tag, escape rooms, etc.)
Gift Shop Revenue
Each stream above will have a specific rate. The anticipated revenue times the rate equals the premium you have to pay. The rates for all of the different buckets above will all be different. For example, the gift shop revenue rate is a fraction of the axe throwing revenue rate. The chances that someone gets hurt and sues you from buying a t-shirt are pretty low as compared to someone getting hurt from an axe.
Rate calculations are proprietary information to an insurance company. The exact calculation is unknown, but the best explanation I can give is they have analysts who gather data from similar industries in similar areas and look at what lawsuits go for. A lawsuit in a major metropolitan area such as New York City is going to be substantially more expensive than a state like Indiana.
General Liability is auditable. Please refer to the audit section for further information.
All Workers Compensation premium (cost) is a function of your payroll as it covers injuries to your employees on the job. Workers Compensation is governed by National Council on Compensation Insurance (NCCI) in 36 states. They set the rates, class codes and other rating factors. The remaining states are on their own ratings systems, but the overall premise on how premium is derived is still the same. Each job duty has a specific rate. With most axe throwing operations, there are only two class codes (clerical and axe throwing coaches). To calculate premium, each class codes’ payroll is multiplied by a set rate. Workers Compensation is auditable. Please refer to the audit section for further information.