Key takeaways
- The annual cost of your business insurance will depend upon a number of factors, including your risk profile and what covers you decide to purchase
- Insurance premiums are pooled by insurers to pay claims, premiums will therefore vary dependent upon insurer's view of your risk exposure
- Working with insurance broker can help you navigate any pitfalls and help you achieve value for money when negotiating your business insurance costs
This guide explores the typical costs of various business insurance types, key factors influencing these costs, and practical strategies to manage them effectively.
Business insurance typical premiums
Public Liability Insurance
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Small businesses: Cover can start at £88 annually or £7.33 monthly for clerical based activities - however if you undertake manual work, premiums will typically start at £500 to £2,000 depending upon your activities.
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Medium-sized businesses: Cover can start at £250 annually for clerical based activities - however cover for manual activities will cost significantly more with premiums starting at £2,000 to £5,000.
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Corporations: Premiums charged will depend upon your risk profile - size measured by turnover, the industry in which you operate, risk management controls, and claims history will impact insurance costs.
Professional Indemnity Insurance
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Freelancers: Premiums can start at £250 annually, or £20.83 per month for a £500,000 limit for sole practitioner or freelance consultant that provides low risk professional advice.
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Small to medium-sized professional firms: (e.g., architects, engineers, IT consultants) Premiums ranging from £1,000 to £10,000 annually can vary significantly depending upon a range of professional risk rating factors.
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Large professional firms: Major consultancy, accounting firms, and solicitors, will face much high premiums potentially exceeding £100,000 annually, influenced by turnover, contract jurisdiction and scope of services.
Employers' Liability Insurance
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Office and clerical activities: If your employee activities are limited to clerical activities, your annual premiums will range from £80 to £350 annually for small to medium sized businesses (with less than 25 employees).
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Manual activities: If your employees undertake physical tasks - such as heavy lifting, working at height or depth, working with machinery, working with heat, premiums will typically start at £750 to upwards of several thousand pounds annually.
Directors and Officers Insurance
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Start-up businesses: That requires cover due to a capital raise, premiums will typically start between £1,000 - £5,000 subject to review of your proposition. Insurers will require a cash flow forecast to show you have sufficient headroom to meet your financial obligations.
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Small to medium sized businesses: That has a positive net worth (assets are greater than liabilities) and made a profit in your latest reporting period, directors and officers insurance premiums can range from £345 - £2,500 annually for a £1 million limit.
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Highly regulated industries: Companies regulated by the Financial Conduct Authority, have a higher degree of risk to regulatory investigations and premiums will typically start £1,500 - £5,000 annually.
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Large public companies: Are exposed to a higher risk of corporate governance and shareholder actions, premiums can range from £25,000 to £100,000 annually. Depending upon the amount of cover required to protected all the interested parties.
How much does D&O insurance cost?
Cyber Insurance
- Small business: Premiums start at £223 a year or £18.58 a month for a £1 million limit for both first-party and third-party covers dependant upon your industry and cyber-security controls.
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Personal data records: If you hold a significant amount of personal information - you can expect your insurance premiums to increase due to the cost to notify these individuals if there is a data breach.
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Technology and financial services: These industries will mean high insurance premiums and will typically need to be underwritten alongside your professional indemnity cover.
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Medium to large businesses: Especially if they operate in retail or manufacturing, which is perceived as carrying a higher degree of risk to ransomware and business interruption claims - can expect premiums ranging from £10,000 to £50,000+.
How much does cyber insurance cost?
Managing your business insurance costs
Discounts are sometimes available for bundling your policies, however sometimes it's best to place different covers with separate insurers given the scope of their cover and competitiveness of their premiums given your risk profile. Additionally, it's recommend that regular reviews are undertaken to ensure the amount of cover you purchase is adequate.
How much business insurance do you need?
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Legal requirements: If you have employees in the UK you are legally required to purchase £5 million employers' liability insurance, however most insurers will provide £10 million for no additional premium.
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Contractual requirements: Counterparties may require you to buy minimum amounts of cover providing them with comfort that you have sufficient resources should they wish to pursue a claim for compensation.
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Size of business operations: Larger businesses with higher revenues will purchase higher amount of cover to protect them from larger financial shocks to the business.
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Regulatory requirements: Industry bodies or regulators may require you to purchase minimum amounts of cover to ensure protection for the end customer (e.g., accountants professional indemnity insurance).
The objective when considering your needs is to purchase enough business insurance, whilst also doing so at a cost-effective premium. Talk to one of our Account Executives about your specific needs. Arrange a call-back.
About the author
Simon Taylor is a respected senior industry professional and a Chartered Insurance Broker with over 20 years’ of experience in the commercial insurance sector as an underwriter, broker and director.