Business insurance is an essential expense for any UK-based company, regardless of its size or industry. It is a critical investment that helps protect your business against unforeseen events that could cause significant financial loss, such as property damage, liability claims, or business interruption. However, the cost of business insurance can vary significantly depending on various factors. In this blog post, we will explore how much business insurance typically costs in the UK and what factors can affect your unique quote.
Understand the Type of Cover You Require
The first step in determining the cost of business insurance is to understand the type of coverage you need. According to a survey by the Association of British Insurers (ABI), public liability insurance is the most commonly purchased type of business insurance in the UK, followed by employers' liability insurance and professional indemnity insurance. Some other types of coverage that may be relevant to your business include product liability insurance, cyber insurance, and business property insurance.
Public Liability Insurance
Public liability insurance, sometimes called “PL insurance”, is advisable for any business interacting with the public. While it is not required by law in most cases, it can provide much-needed protection for your business. PL insurance covers any event wherein a member of the public claims your business has caused personal injury or property damage and typically handles legal and settlement costs to indemnify the injured party.
The average annual cost for standard PL insurance in the U.K. runs about £118 for small businesses but can be significantly higher for those operating in high-risk fields. Public injury claims in the U.K. can cost upwards of £100,000 in some extreme cases, though most fall between £10,000 - £20,000. These expenses are devastating to small businesses working with tight margins regardless of the cost.
PL insurance covers various potential hazards, and most businesses need to consider purchasing coverage in the 1 - 5 million pound range.
Who Needs Public Liability Insurance?
Public liability insurance covers builders, retail owners, restaurants, and everyone in between. Suppose you own or lease property that the public can access. In that case, PL insurance will indemnify your business if someone is injured on the property due to your business activities.
If you own a retail establishment, for example, and someone slips in water that has been tracked across the floor and injures him or herself, they could potentially sue your business for not ensuring a reasonably safe shopping environment. Hairdressers could be sued for knicks or infections that result in injury, and even tutoring companies could be held liable for psychological damages if a student claims improper instruction. In all of these cases, PL insurance has you covered.
On the higher end of the spectrum, businesses such as tradespeople and builders take on an elevated level of public liability risk. One of your labourers could make a simple mistake, such as knocking a water line or damaging a structural component, that results in millions of pounds worth of property damage. Even barring these mistakes, delays could cause your clients to lose money, leaving you on the hook for “lost time” damages to their business. In either case, having an appropriate amount of PL coverage will protect your business from severe loss.
How Much Does Public Liability Insurance Cost?
For small businesses, the cost of PL insurance can range anywhere from £50 up to £500 or more per year, depending upon your profession and the coverage needed.
Clothing and craft retailers, cafes, and simple service providers such as cleaners, dog walkers, and instructors can get by with minimal coverage, given that damages in these industries are typically limited. Coverage amounts in the £1 -2 M ballpark are enough to indemnify you in these circumstances. For high-risk small businesses including builders, transportation operations, and event planners such as race organisers, a higher coverage limit is advisable. While the annual cost for this insurance coverage can, at times, exceed £500, the expenses incurred for coverage are far lower than the devastating possibility of a multimillion-pound lawsuit for property damage down the line. Coverage up to £5 M will take care of almost any serious PL suit for small businesses.
Employers’ Liability Insurance
Unlike PL insurance, employers’ liability insurance is required for most businesses with a workforce. Employers’ liability insurance covers the costs for you and your employees should a loss be incurred. This includes injury or illnesses your employees incur as a result of working for you, such as if they trip and fall on duty, but also covers your employees as a third party if they should cause injury to the public in the line of their work.
For example, if one of your servers spills a hot beverage on a customer and the customer brings a suit against the employee, your employers’ liability coverage kicks in to cover that employee as a third party. It also covers accidental property damage by your employees while working. If you operate a cleaning service, and one of your employees accidentally uses the wrong solution on a surface and damages it, your employee and company will be covered.
How Much Does Employers’ Liability Insurance Cost?
While this insurance is mandatory for almost all U.K. employers, it’s worth shopping around to find the best coverage available for the cost. Employers’ liability coverage typically ranges from £60 - £200 per employee annually, for most businesses. It can change depending upon the type of employee and their level of risk and may be slightly higher for extremely high-risk employees, such as underwater welding professionals.
The minimum required level of coverage depends on your industry, but it is typically considered “per employee,” meaning that more employees will mean a higher coverage rate. For example, if you must be covered for £100,000 per employee, and you have six employees, you are required to carry £600,000 worth of employers’ liability coverage.
The above is an example, and minimum coverage will range from relatively low costs for a cashier to relatively high costs for labourers. General records of workplace safety can also impact your rates—if multiple employees have made claims against your business in the past, you’ll face higher premiums thanks to a record of creating an unsafe working environment.
If you do not carry this coverage, you risk losing your business licence in addition to facing fines of up £2,500 per employee and per day.