How much does business insurance cost and how can you save money?

The cost of business insurance depends on what kind of company you run, how many employees you have, the risks your business faces, and the type of insurance you buy. However, there are always ways to keep costs down. 

Here are the main factors influencing your business insurance costs and how to make sure that you don’t overpay.

What impacts the cost of business insurance?

Most businesses buy insurance packages that cover different types of protection. For instance, you could purchase a bundle with professional indemnity insurance, public liability insurance and employers' liability insurance.

The cost of your policy varies significantly based on the industry you’re in, whether you deal with the public and how many employees you have. Policies start from just a few pounds a month but can also cost significantly higher.

Factors that typically influence your premiums include:

Industry or profession: Some businesses face higher risks and may require more extensive coverage. 

For instance, a builder is likely to face health-and-safety risks that make cover more expensive, whereas a financial adviser may face costly legal challenges if they provide bad advice. At the other end of the spectrum, designers and copywriters may face lower risks as they don’t typically operate heavy equipment or deal with the general public.

Tradesmen are often considered to represent a high risk because they have lots of exposure to customers and often work at heights or use dangerous tools, whereas a consultant carries less risk as they work from home or in an office.

Coverage level: The higher your coverage level, the more you pay. Equally, if you choose to include lots of optional add-ons with your policy, your premiums will be higher. However, that doesn’t mean you should skip on your insurance. It’s important to protect your business by ensuring that you have the right cover at a high enough level.

Excess levels: A policy’s excess is the money you pay every time you make an insurance claim. The lower your excess, the higher your premiums are. Increasing your excess can result in lower premiums, but if you make a lot of claims, it could cost you more money overall. 

Size and scale of your business: Insurers assess your annual turnover, contracts and number of employees to calculate how much risk you face. A big business with a lot of employees usually attracts higher premiums than a start up, because it faces more risks. Location matters, too. As do things like whether your employees regularly travel or if you have premises in high-risk areas.

Claims history: A business with a history of frequent claims is typically charged more for insurance coverage than one that has made no claims.

Read more:

• What is business insurance?

• What's the difference between public liability insurance and employers' liability insurance?

• How does professional indemnity insurance differ from public liability?

How to save money on business insurance?

Renewing your cover automatically means you’re unlikely to get the best deal. Instead, shop around each year using a comparison site to see what’s available and whether you can get the same level of cover for a lower premium. Using a broker can also be a good way to get the right product or package that’s tailored to your business’s needs.

Some insurers offer the option to pay monthly rather than annually. This might suit your business from a cash flow perspective, but monthly premiums can increase the overall price of your insurance. Most policies cost less if you pay for them annually with one up-front payment.

You should also investigate bundled insurance policies. Often, combining all the insurance you need into one package can be cheaper than buying each policy individually, but you should run the numbers to make sure. Again, a broker can help you navigate these products.

Make sure you’ve correctly explained what your business does, how your employees are classified, and what kind of work they are doing. It’s important to be truthful, or your policy may not be valid, and you need to make sure you’re not under-insured. At the same time, if you say your employees are high risk when they’re not, you might pay more than you need to.

Trade and professional organisations often provide insurance to their members through partnerships. This may be more affordable than buying cover independently. 

Do I need business insurance?

Depending on your business, you may have to have some forms of insurance by law. You can also purchase additional types of cover to protect yourself and your employees.

Legally required insurance:

• Employers' liability insurance – mandatory if you have employees 

• Commercial motor insurance – compulsory if your business uses vehicles

• Professional indemnity insurance – a regulatory requirement in some professions, such as law and accountancy

• Public liability insurance – some organisations may insist you have this before they will sign a contract with you. For example, you often need public liability insurance when working with local authorities or governments

Optional cover:

• Commercial property insurance – protects your buildings 

• Public liability insurance – protects you if you harm a member of the public, either through injury or damaging their property

• Product liability insurance – covers compensation payouts to people who suffer damage or injury due to your products. You don’t have to be the manufacturer to be liable

• Directors’ and officers’ liability insurance – covers the cost of compensation claims made against your company’s directors and key managers

• Cyber insurance – covers losses relating to IT systems, networks, and data

• Personal accident insurance – provides compensation if an employee is permanently injured or killed in an accident

• Business equipment and office contents insurance – covers things like computers, equipment, tools and stock

• Business interruption insurance – provides financial protection against lost sales and profits if you’re unable to operate due to an incident

• Equipment breakdown insurance – helps with costs if you suffer sudden mechanical or electrical failure in key pieces of equipment

• Key person insurance – insures employees that are critical to the running of your day-to-day business

• Credit risk insurance – protects against the risk of non-paying customers or clients

• Working from home insurance - protects your home as well as your business if something goes wrong