Tennessee boasts a cost of living index below the national average, making it an affordable place to live and conduct business. Last year, Tennessee had the 8th lowest cost of living compared to all other U.S. states.
Alongside an affordable cost of living, the state was also ranked highly for its workforce, infrastructure, technology and innovation, and overall economy. With all of these positive attributes in mind, Tennessee has earned the #3 spot in the official 2023 list of top states for business.
Tennessee’s GDP growth has also outpaced the national average, growing steadily since the pandemic. This growth represents increased employment opportunities and diversification of industries in the state. These attributes have led to an increase in new businesses looking for success in the state’s growing economy.
Whether you’re considering moving your existing business to Tennessee or you’re already a resident opening a new business, you must take the time to learn about the unique, state-specific factors that might impact your commercial insurance rates.
Here, Ruth Eanes—Senior Commercial Lines Underwriting Manager at Central Insurance—lays out the three factors Tennessee business owners should consider when protecting their assets from common local risks.
Factor #1: Severe Weather Risks
Tennessee’s unique geography and climate make it susceptible to severe weather events. From convective storms and tornadoes to occasional earthquakes, where a business chooses to set up shop in the state will determine what weather they’ll deal with and, in turn, the types of insurance they’ll need.
- Convection Storms: Tennessee ranks among the top states for average annual tornado density, with approximately 9.7 tornadoes per 10,000 square miles. These storms can cause extensive property damage and disrupt business operations.
“Convective storms are particularly common in the Western part of Tennessee,” Eanes says. “In this area, there is a pretty significant convection storm every 2-3 years.” Stay knowledgeable on when and where tornadoes strike.
- Earthquakes: While not as frequent as storms, earthquakes can still pose a risk, especially in the state’s western regions near the New Madrid Seismic Zone. Even moderate earthquakes can lead to structural damage and business interruptions.
- Snow: Although Tennessee is not known for its snowy weather, it experiences all four seasons, including winter. Don’t underestimate the damage that snow and water can do to a commercial property, particularly the roof.
Analyzing where your business falls geographically and understanding the weather risks most relevant to your property allows you to tailor your insurance coverage to protect against significant losses in the case of a severe weather event. Understanding common weather risks can help you stay protected from property damage, business interruption, and related liabilities.
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Factor #2: Diverse Business Types & Insurance Needs
Tennessee offers a diverse economy with growing industries such as manufacturing, healthcare, agriculture, tourism, and technology. With such an array of business types, each industry has its own set of risks and insurance requirements. Here are some things to consider for the most popular businesses in the state:
Manufacturing: With over 6,000 manufacturing establishments contributing significantly to the state’s GDP, businesses in this sector can find great success in Tennessee. Manufacturers should seek coverage for equipment breakdowns, product liability, and supply chain disruptions To protect this potential.
Explore: Loss Control tips for Manufacturers
Healthcare: Tennessee is home to many leading healthcare facilities, necessitating specialized insurance like malpractice coverage, cyber liability insurance for patient data protection, and regulatory compliance coverage. The healthcare field can also benefit from the state’s many research universities offering a talented workforce.
Agriculture: The state’s agricultural sector faces risks related to crop damage, livestock losses, and liability concerns, making farm insurance and agribusiness coverage essential for farmers and related businesses in the industry. Agriculture businesses can suffer significantly from the weather risks unique to the state.
Tennessee is a great state for your business to take root due to its growing economy and skilled workforce from nearby colleges. However, new business also means new and inexperienced employees. Ensure your business offers the proper training for all employees to allow them to perform their roles safely and avoid Workers’ Compensation claims.
Business owners in Tennessee can also benefit from instituting adequate loss control measures. With Central, business owners can access expert loss control specialists who will work with you to create an individualized Loss Control Program.
Factor #3: Regulation Compliance
Tennessee’s regulatory landscape, including insurance requirements and industry-specific regulations, should be thoroughly understood before opening a new business in the state. Comprehending these requirements will allow a business to remain compliant and adequately protected against fines or other penalties.
For instance, Tennessee law mandates Workers’ Compensation insurance for businesses with five or more employees. This insurance would cover medical expenses and lost wages for employees who have been injured on the job. Contacting an insurance agent is the best way to confirm you have the required insurance options for your business to be compliant with state regulations.
Different industries in Tennessee are also subject to specific regulations and licensing requirements. For example, manufacturers need to adhere to state-specific safety standards within their facilities, product quality controls, and environmental regulations.
As major industries in the state, manufacturers and construction companies must be wary of accidental pollution. An accidental spill of material into the air or soil can result in significant fines and consequences for your business’s reputation. Pollution Liability insurance is a crucial safeguard for organizations working with any contaminant.
Look for industry associations that can provide valuable resources and advocacy for businesses. For example, the Tennessee Chamber of Commerce and Industry supports manufacturing organizations looking to complete safety training, remain compliant with state regulations, and more.
The Central Difference
Whether you’re opening a new business or relocating to Tennessee, one of the best ways to stay updated on state-specific trends and reduce your rates is to work closely with an insurance agent.
At Central, we work with only a small group of hand-selected, local insurance agents who take pride in delivering superior service to our policyholders. To understand your commercial rates better, your agent will be your best source for expert advice.
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