A short-on-time guide to buying business insurance


For many reasons, insurance costs are increasing for buyers in all sectors.

For individuals, insurance costs are certainly a burden, but for an organisation insurance costs can be a significant expense that needs to be managed properly.

Risk management is crucial to proper governance of a business or public body. And while costs continue to climb, it’s ever-more important to be smart about buying the right kinds of insurance. In this article, you’ll find a brief overview of the basic concerns to consider when purchasing insurance for an organisation.

Choose a Policy That Suits Your Needs

Getting the right policy for your business starts with analysing the nature of your organisation and the types of assets involved. With that in mind, you can start estimating the value of losing those assets and how to best protect them. Packaged policies are often a good idea because they can cut down on costs. However, they may include coverage that your organisation doesn’t need.

For instance, many policies offer “Personal Accident” cover, which is cheap, but very rarely claimed upon. Therefore, getting it would probably be a waste of money. If your business falls into a category that requires compulsory insurance, such as employer’s liability, that must obviously be included.

However, if there are no required insurance types for your organisation, choosing the right policy will come down to doing valid risk assessment. Evaluating the right amount of coverage in these cases is a challenge and it might be worthwhile engaging the services of an insurance actuary, experienced in taking a holistic view of your business. – just because a risk is insurable, doesn’t mean that it should be insured. There is a myriad of factors to consider, long before you get to the stage of approaching insurers for quotes.

If your organisation already has insurance, don’t assume it’s correctly put together. It’s worth speaking with an insurance agent to get rid of coverage you might not need and add coverage you’re not getting. When you decide on the necessary policies, you can start looking for a good deal. If you decide to purchase traditional insurance (i.e. not self-insuring) you can choose to purchase direct or through a broker.

Purchasing Direct vs. Using a Broker

Insurance products are still largely sold through brokers, even as the process becomes increasingly web-enabled. For many businesses, it might be a good idea to get the help of a broker as there’s so much to consider. Business insurance can get complex and securing the best price for the right combination of products is tricky, and often multiple insurers have to be involved.

If you choose to buy direct, understand that whilst it can be quick and easy, policy terms and conditions can vary widely. Getting quotes from several insurers and comparing all the possible packages is time-consuming, but the reward is cover that’s right for you.

If you do choose to purchase through a broker, there are a few things to keep in mind. First is the specialisation of the broker. Ideally, you want someone who knows your industry well and has worked with other organisations like yours before.

Getting even a broad idea of what insurance will cost your business is very difficult, as the premiums are set by the insurer’s actuaries on receipt of the risk information. Having said that, an experienced insurance advisor will have “rules of thumb”, which may be relevant in your situation eg Employer’s Liability cover (for a “low risk” business) typically costs £50-£100 per head, motor fleet cover (with nil XS) typically costs £1000 per car. With such an experienced advisor that has experience with your types of assets, you can approach the insurance market confidently, knowing what to expect.

Also, it’s important to get brokers to look carefully at all the stipulations of the insurance you’re buying and make sure that it matches up with your organisation’s practices. A broker may be very good at getting the best price possible on insurance, but that’s not good enough if the insurance won’t cover you under the right circumstances. For example, cyber cover often requires you to take backups at least weekly; if you don’t, the policy will not pay out, so it is not suitable for you.

Another aspect to consider is the level of service offered by the broker and whether they work on commission or a fee. A broker can be very helpful in getting the right insurance product and digging through all the options that you may not be able to find, or they could be no more useful than something found online.

The Right Type of Coverage

It’s important to have at least a basic knowledge of the kinds of insurance products available. While this isn’t an exhaustive list, it’s a good start to understanding what assets you should be insuring and why.

  • Employer’s liability insurance is one of the most common types. It covers liabilities for the death or bodily injury of your employees.
  • Public liability insurance covers claims from the general public resulting from business activities.
  • Product liability is similar to public liability but applies to products your business manufactures or repairs and sells.
  • Building insurance protects your organisation’s premises for rebuilding costs.
  • Contents insurance covers the theft of business equipment.
  • Business interruption insurance provides coverage in the event of disasters that preclude the business from operating.
  • Key person insurance covers losses in the event of death or disability of a person indispensable for organisational operation.
  • Employee travel insurance covers employees when they travel abroad on business matters.

Simplifying Business Insurance

Buying business insurance will inevitably be complex, but it doesn’t have to be stressful. If you choose to buy directly from insurers, give yourself plenty of time to explore the options and read all the fine print. If you’re buying through a broker, make sure you pick one who knows your industry, provides great service, and is willing to dig deep to find you the best prices.

If your organisation is large enough, consider a thorough holistic risk review with an independent insurance actuary: just because a risk is insurable, doesn’t mean that it should be insured!

Author’s Bio: John is an actuary and owner and Director of HJC Actuarial, which he founded in 2003 and which has advised over 100 clients since it’s’ inception. He has worked in the insurance industry for 30 years, qualifying as an actuary in 1995 and becoming a Partner in a major global consulting firm in 2000. Since 2003 he has provided independent advice to his clients on optimal insurance program design, presentation of risks, and premium negotiation with insurers, insurer solvency assessments, policy wordings, insurer selection, and insurance broker selection.