What affects the cost of business insurance?

The cost of business insurance mainly comes down to two things:
1. The first is what you’re getting cover for — this will determine the type of cover you need.
2. The second is the level of cover you’re getting, which is the maximum your insurer will pay out if you make a successful claim.

Public liability, product liability and employers’ liability insurance are the most commonly bought covers — and because they’re so popular, it’s easy to find great protection at a competitive price, fast.

On the whole, insurance for first-party risks — like damage to property or business interruption — tends to cost less than cover for third-party claims, such as professional indemnity, cyber insurance or directors’ and officers’ liability.

To learn more about the different covers available to businesses, as well as to figure out which might be right for you, check out our in-depth guide on the types of business insurance.

Remember that business insurance covers a range of eventualities and circumstances, but it doesn’t cover everything. Make sure to read your policy documents carefully to understand the full details around exclusions, terms and limits of your cover.

The cost of your business insurance is also related to the industry your business operates in. Every industry has its own specific risks.

A hairdresser, who works with scissors and chemicals, will have a different risk profile from someone who owns a shop.

Tradespeople, for example, will sometimes be working at height or with hot tools, which can increase the premium your business may pay.

The size of your business is determined by your revenue the number of employees you have.

Higher revenues with more staff will generally increase your insurance premiums. Higher revenue usually means more customers, more contracts or more stock. More staff means more responsibility. Basically, more could go wrong. All of that adds up to a greater risk for insurers, which can lead to higher premiums.

Superscript’s online portal allows you to amend the revenue or employee count for your policy at any time, with no fees, so you can be sure you only pay for what you need.

Some areas in the UK cost a little more (or less) to insure than others, so the location of your business might affect the cost of your business insurance. That’s because insurers look at lots of small factors, including where past claims have happened.

The price difference is usually minor — but it helps keep things fair for everyone.

If your business has had previous insurance claims, it’s important to tell your new insurer at the time of buying a policy with them.

Insurers will assess any past claims you’ve made, taking into account the circumstances and size of the claim, to understand the risks your business faces in better detail.

Smaller claims don’t typically increase future insurance premiums, but every case is different.

Your excess (also known as the deductible) is the amount you agree to contribute towards each claim. As with other types of insurance, your agreed excess will impact your premium.

A bigger excess will usually mean you pay a smaller premium, and vice versa.

On many of our policies, you don’t have to pay any excess; however, this varies depending on the size of your business, the type of policy and level of cover you have. If your policy includes an excess, you’ll be shown the amount in your quote before you buy your policy.

The standard rate of Insurance Premium Tax (IPT) is currently 12% for UK businesses. Government changes to the tax rate may change your premium amount year on year.

Another thing to note is that business insurance is an "allowable expense", which means that it is tax-deductible in the UK.