One of the most common questions small-business owners ask is: Which factors actually affect the price of insurance?
Trade and Type of Work
The kind of work you do is one of the biggest drivers of your insurance premium. A café, for example, faces higher public liability and property insurance costs because of customers on-site, hot equipment, and food hygiene. A builder or tradesperson will often pay more than an office-based consultant because of the risk of accidents on-site and the value of tools carried around 12. By contrast, a freelance designer or consultant working from home typically sees lower insurance costs because the risks are mainly around mistakes in advice or design work.
Size of Business and Employees
The number of people involved matters. A sole trader with no staff will usually pay less than a business with several employees, as employers’ liability insurance is legally required when staff are on payroll. More staff also means a higher chance of claims 3.
Location
Where you work also influences your price. Businesses in city centres, or areas with higher crime or flood risk, tend to pay more. A shop on a high street in London, for instance, may face higher premiums compared to the same shop in a quiet rural town 42.
Claims History and Experience
If you’ve had multiple claims in the past, insurers may see you as higher risk and increase your premium. Similarly, a brand-new business with no track record may not benefit from loyalty or experience discounts 2.
Economic and Market Conditions
Insurance prices aren’t just about you. Rising construction and repair costs, inflation, and global reinsurance markets all feed into what you pay. This means even careful businesses can see price increases when insurers’ costs rise 5.
Emerging Risks
As more small businesses rely on digital tools, cyber insurance is becoming a growing factor. Premiums for cyber insurance have risen in recent years as claims from ransomware and data breaches have climbed 6.
Policy Design Choices
Finally, the way you set up your policy matters. Higher policy limits (the maximum an insurer will pay) and lower excess (the amount you pay yourself before insurance kicks in) both push premiums up. Choosing only what you need and setting realistic limits helps manage costs 7.
So, What’s the Answer?
The price of small-business insurance depends on many factors: your trade, size, location, claims history, wider economic conditions, and even how you structure your policy. A café, a builder, and a freelance designer will all face very different premiums because their risks are so different.
Why Insurance Still Matters
When you’re running a small business, it’s tempting to focus only on keeping costs down. But insurance is there to protect what you’re building. If you’re operating as an individual, your home and savings are at risk if something goes wrong and you’re uninsured. Having the right policy in place means one claim doesn’t put everything you’ve worked for at risk.
Research conducted by Delorean
Footnotes
Moonworkers: What type of business insurance do I need and how much does it cost? (2024) ↩
James Hallam: How much does small business insurance cost? (2024) ↩ ↩2 ↩3
MSA Insurance: Why is business insurance going up? (2023) ↩
Bionic: Why can business location affect insurance prices? (2024) ↩
Travelers: Factors that affect insurance costs for commercial property (2024) ↩
MoneyWeek: Why cyber insurance is crucial to your business (2023) ↩
Ollis/Akers/Arney: Factors that affect small businesses insurance costs (2023) ↩