Small business insurance costs depend on so many factors that the amount one business pays can be drastically different from another business. It depends on what types of insurance a business needs and the risk profile of the business.
There are over a dozen different types of business insurance. Some businesses will only need one or two types; others might need many. It depends on what type of business is carried and what risks need to be protected against.
That said, there are starting costs for different types of business insurance that can be helpful to understand. Having this knowledge can help you understand if you’re getting a good deal or not; it can also help you budget. For example, if only public liability insurance is needed, the average cost of business insurance for a small business is around £118 a year, according to NimbleFins (read more here).
Luckily, many types of business insurance are relatively affordable. The type of business insurance that can be most variable in cost is professional indemnity insurance. But other types can be highly variable as well, depending on the risk profile of the business being insurance.
How much does liability insurance cost for a small business?
Liability insurance costs start from around £118 for public liability for a small business, but there are three other main types of liability insurance that might be required as well.
Product liability insurance is often included essentially for free with public liability. But when purchased separately, it starts from around £80 per year or £6-7 per month.
Employers’ liability insurance costs from around £65 per employee for office workers; employees doing more dangerous work can cost multiples of this to cover. The cost rises with the number of employees, but the costs are less and less as the number of employees grows on a per-employee basis.
How to cut insurance costs in a small business
There are a few simple ways to cut insurance costs for a small business:
- Pay annually instead of monthly to avoid paying interest charges which can top 20%. If you need to pay monthly, be sure to enquire about the finance rate before you sign up and compare this to other providers, as well as this added cost will vary. You can also pay upfront for cheaper types of business insurance (e.g. cyber insurance) and opt to pay monthly for an insurance policy that is significantly more expensive (e.g. professional indemnity). By doing this, you won’t pay finance charges on all of your business insurance.
- Compare prices with different insurance providers; this can be accomplished by checking prices with multiple insurance companies, contacting a broker or using a comparison site.
- Only buy the insurance you need. For example, a business that doesn’t have in-person interactions with members of the public or their property probably does not need public liability insurance. Or a business that doesn’t give advice, product designs or deliver service in a professional capacity wouldn’t probably need professional indemnity insurance.
- Be clear about what you do. This can especially help rein in costs for professional indemnity insurance, as insurance companies are likely to charge more if there is any uncertainty about the type of business being carried out.
- Avoid claims. When buying business insurance or renewing a policy, you’ll need to declare if you’ve made a claim. You must be honest about this because if you’re not, you need to claim that your claim might not be paid in the future. In addition, insurance providers are more likely to charge a higher premium to a previously claimed business, as this could be a sign the company is careless, for example, and more likely to claim in the future.
How much does small business health insurance cost?
Small business health insurance costs start from around £169 a month to protect 5 employees (read more here), but costs can be over £200 a month for higher levels of cover. This is according to NimbleFins, who analysed prices from Bupa.
And companies with older employees will face higher costs for small business health insurance. For example, costs can rise threefold for employees in their 60s compared to employees in their 20s. Not a surprise, really, since older people tend to have more health problems and would therefore be more likely to make a claim on private health insurance.
Costs for small business health insurance rise in lockstep with the number of employees. That is, a company with 10X as many employees will usually pay a premium that is 10X higher.
This is different to how employers’ liability is priced; for this type of liability insurance, additional employees usually cost less to insure.
Sources:
- https://www.nimblefins.co.uk/business-insurance/average-cost-business-insurance-uk
- https://www.nimblefins.co.uk/business-insurance/small-business-insurance-uk/average-cost-small-businsss-health-insurance
- https://www.bupa.co.uk/business
- https://www.gov.uk/employers-liability-insurance
- https://www.theaa.ie/blog/paying-monthly-annually-for-car-insurance/
