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How much does business insurance cost?

When you run a business, you know that sometimes you need to speculate to accumulate. The same can be said for ensuring you pay out for the right sort of business insurance – because cheap doesn’t mean best or most suitable, it’s about getting the cover you need at a fair price. But how is your business insurance premium calculated?

When you run a business, you know that sometimes you need to speculate to accumulate. The same can be said for ensuring you pay out for the right sort of business insurance – because cheap doesn’t mean best or most suitable, it’s about getting the cover you need at a fair price. But how is your business insurance premium calculated?

Written by
Mubina Pirmohamed
Business and landlord insurance expert
Last Updated
29 JANUARY 2024
4 min read
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What affects the cost of business insurance? 

Business insurance usually comes in packages that combine various types of insurance policies. The one that’s right for you will depend on the nature of your business and the level of cover you need. 

The amount you pay for your policy will differ according to your package. Things that will affect the cost of your business premium include your:

  • Industry or profession – certain types of business carry a greater risk and could need more cover. A builder, for example, is likely to pay more for insurance than a graphic designer because they work with more dangerous equipment.
  • Level of cover – insuring your business for a large amount or adding policies to your cover means you’ll have more protection if the unexpected happens. But the higher you want a pay-out to be, the more you’ll be expected to pay in premiums.
  • Level of excess – the amount you’re willing to pay towards a claim (your excess) can make a big difference to the cost of your business insurance. You can choose to pay a higher voluntary excess on top of your compulsory excess. This will make your premium cheaper, but you’ll have to pay more if you make a claim.
  • Business size – insurance providers will look at your annual turnover or largest contract, along with how many people you employ, to determine risk. The more you could potentially lose, the more you’re likely to pay for insurance.
  • Claims history – a business that has made multiple claims in the past will usually be charged more for insurance.

What do I get for my business insurance premium? 

Typically, your insurance will cover you for compensating any claims made against your business, as well as the associated legal fees. It could also pay out for damage to your premises or stock, and losses if you can’t trade because of business interruption

The amount of cover that’s included in your policy will depend on what you’ve specified or agreed with your provider. But having the right protection in place means you can get up and running again quickly if something bad happens. 

Your business is unique and the cover you need won’t be the same as someone else’s. That’s why most insurance providers will offer you packages where you can bolt on various types of cover. For example, if you’re an accountant or solicitor offering professional advice, you might consider professional indemnity insurance. This could compensate clients for any losses they’ve suffered because of advice you gave them. 

Learn more about the different types of business insurance you might need.

What business insurance do I need by law? 

Where insurance is concerned, businesses’ legal obligations can vary and will depend on your set-up and line of work. 

Employers’ liability insurance 

One type of business insurance you must have under UK law is employers’ liability insurance – but only if you have employees. Employers’ liability insurance could cover you if one of your employees becomes ill or is injured as a result of working for you. If you employ one or more people or are a limited company with multiple directors, it’s a legal requirement to have cover. If you’re not a limited company, it’s not a legal requirement to have employers’ liability insurance if the employees are immediate family members, though if a policy is in place it would still cover immediate family members working for you.

Business car insurance

If you own vehicles in connection with your business, then you also need to have motor insurance by law. The minimum required by law is third party, but if any of your vehicles were stolen or damaged by fire, could you afford to repair or replace them out of your own expenses? If not, consider comprehensive cover.  

Unfortunately, Compare the Market doesn’t currently offer business car insurance.

Public liability insurance

This is a legal requirement if you run a specific type of business, such as a horse-riding stables. If you’re in any doubt about your legal obligations or licence requirements, your local council will be able to help you. Any business that comes into contact with the public is advised to have public liability insurance, as it could cover you for personal injury claims and loss or damage to property made by the public, but in most cases it’s not a legal necessity.

What else should I consider when buying business insurance? 

Some insurance providers will offer you optional extras like debt recovery and help with contract disputes. These are worth considering if you think you’re likely to deal with tricky customers. Both will add to the cost of your premium, so think carefully whether you need them. 

Ultimately, what’s right for your business is down to you, your business and the cover you need. The cost of your premium will be directly related to that.

Frequently asked questions

How much will it cost to insure my small business?

Business insurance is likely to be cheaper for small businesses than big companies because, in theory, there’s less that can go wrong. But the cost of insuring your small business will depend on things like how many people you employ, the risk profile of your firm and the level of cover you take out.

How can I reduce the cost of business insurance?

Firstly, it’s never a good idea to renew your insurance automatically. You might be able to find a cheaper deal elsewhere. Comparing policies with us can help you get the right cover at the right price. You can also choose a higher voluntary excess, but make sure you can afford to pay this if you make a claim. And paying annually rather than monthly could save you a few precious pounds because most insurance providers charge interest on monthly direct debits.

Does it cost to make a business insurance claim?

Yes, you’ll have to pay an excess towards any claim you make on your business insurance policy. You’ll pay a different excess for each type of cover you have, so check your policy documents carefully to avoid any nasty surprises.

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