Business
Cheap business insurance: combined policy or separate covers?
Is cheap business insurance easier with one combined policy? When bundling covers costs less or more, and which covers you shouldn't drop to save money.
Putting everything into one commercial combined policy does not automatically make business insurance cheaper: a bundle can cost less than separate policies when you need most of what it includes, and more when you are paying for sections that do not fit your business. The fairer test is not "package or separate" but whether each cover you pay for is one you need, at a sum insured that matches what you really have.
Below is how the two approaches compare, when each tends to work out better, and which covers are not worth cutting to bring the price down.
What is a commercial combined package insurance policy?
A commercial combined policy puts several business covers into one contract with one insurer. The usual sections are:
- Property: buildings, contents, stock, tools and equipment.
- Business interruption: lost income and extra costs after an insured event, such as a fire, stops you trading.
- Public and products liability: claims from customers or members of the public for injury or damage caused by your business or what you sell.
- Employers' liability: claims from staff injured or made ill through their work.
Some insurers let you add or remove sections, and some offer extras such as money cover, goods in transit or legal expenses. Motor cover for business vehicles is normally a separate policy. You get one schedule listing every section, its limit and its excess, and one renewal date.
Is one combined policy cheaper than buying each cover separately?
Sometimes, but not by default. A bundle does not automatically carry a discount. What actually happens is that one underwriter looks at your whole risk at once. That can help or hurt, depending on the business.
| One combined policy | Separate policies | |
|---|---|---|
| How it is priced | One insurer rates the whole risk together | Each insurer rates only its own section |
| Gaps and overlaps | Sections are designed to fit together | Gaps or double cover are easier to miss |
| Paying for what you don't need | More likely if the package includes fixed sections | Less likely, as you only buy what you choose |
| Unusual or specialist risks | One insurer must accept every part | You can place awkward parts with a specialist |
| Admin | One renewal, one schedule, one claims contact | Several renewals, documents and contacts |
| Tax | Insurance Premium Tax on the premium | Insurance Premium Tax on each premium |
When bundling can work out cheaper
- You need most of the standard sections, for example a shop, workshop or small factory with premises, stock, staff and customers visiting.
- Your risk is fairly typical for your trade, so an insurer is happy to take the whole thing.
- Separate policies would leave you paying for overlapping cover, or for minimum premiums on several small policies.
When separate policies can work out cheaper
- You only need one or two covers. A sole trader working on clients' sites may need public liability and tools cover but no buildings, stock or employers' liability.
- One part of your business is unusual or higher risk and pushes up the price of the whole package, while the rest could be insured on standard terms.
- You rent premises and the landlord insures the building, so a package that includes buildings cover would be paying twice for it.
Bundling also doesn't avoid tax. Insurance Premium Tax is charged at a standard rate of 12% on most general insurance, so it applies to one combined premium or to several separate premiums in the same way.
Who has the lowest-priced commercial insurance?
No insurer is the lowest priced for every business. Each premium is built from your own details: what you do, where you do it, how much you insure, your turnover and wageroll, your claims history and how well the premises are protected. An insurer with a keen appetite for offices may decline a bakery with ovens running overnight, or quote it at a high price.
That is why searching for the lowest-priced cover tends to lead to comparison pages rather than an answer. The lowest quote for one firm says little about the next. What you can control is how clearly and accurately your business is described, and whether the cover you ask for fits.
Accuracy matters for a legal reason too. Under section 3 of the Insurance Act 2015, a business must make a fair presentation of the risk before the contract is entered into. If it doesn't, and the insurer would have charged a higher premium had it known the truth, Schedule 1 of the Act lets the insurer reduce a claim proportionately. If the breach was deliberate or reckless, the insurer can avoid the policy, refuse all claims and keep the premium. Understating turnover, staff numbers or activities to make business insurance cheap can cost far more than it saves.
Which covers shouldn't you drop to save money?
Employers' liability, if you employ people
GOV.UK says employers must have employers' liability insurance as soon as they become an employer, from an authorised insurer, covering at least £5 million. You can be fined £2,500 for every day you are not properly insured, and £1,000 if you do not display the certificate where employees can see it. There are exceptions, for example if you only employ a family member or someone based outside England, Scotland and Wales. If you have staff and are not exempt, this section cannot be removed from a combined policy to lower the price, and if you buy covers separately it must still be in place.
Motor cover for business vehicles
You must have motor insurance to drive a vehicle on UK roads, and third party cover is the legal minimum. Vans and cars used for work usually need their own commercial policy alongside any combined package; our guide to business car insurance classes explains the different levels of business use.
Full sums insured on property
Property cover is where trimming numbers does the most damage. Many property sections include an average clause. The Financial Ombudsman Service explains that if something is insured for half of what it would cost to replace, some insurers will only pay half the claim. The Ombudsman's guidance is written for home insurance, but average clauses work the same way in many business property sections.
For example, with made-up round numbers: if stock worth £60,000 is insured for £30,000 and a leak damages £8,000 of it, a claim with average applied could be settled at £4,000, less the excess. Buildings should be insured for the cost of rebuilding, not the market value.
Liability limits that match your contracts
Some clients and venues ask for a minimum public liability limit before they let you work for them. Lowering the limit below what your contracts require can save a little on premium and cost you the work. Our article on £2m public liability insurance explains how per-claim limits and aggregates work.
How do people lower the cost of business insurance without cutting cover?
None of these will always reduce a premium, but each deals with something insurers price for.
- Check which sections you actually need. List what you own, what you rent, who works for you and where you work. Remove sections that genuinely don't apply, such as buildings cover when the landlord insures the building (check the lease).
- Get the figures right. Use your latest accounts for turnover and wageroll, and up-to-date replacement values for stock and equipment. Overstating costs money; understating risks average and proportionate claim cuts.
- Describe your trade precisely. A vague description can be rated as the riskiest activity it might cover. Say what you do and what you don't do.
- Show how you manage risk. Alarms, approved locks, fire precautions and written safety procedures help an underwriter judge the risk. If a policy makes something a condition, keep to it.
- Pick excesses you could pay. A higher voluntary excess can lower the premium, but you pay it on each claim, and a combined policy may have a different excess for each section.
- Compare like with like. Line quotes up section by section: sums insured, liability limits, excesses, the business interruption indemnity period and any conditions. A lower premium may simply be less cover.
Our guide to commercial combined premiums goes further into the rating factors behind each section.
Where can you get quotes for a combined policy?
Whether a package or separate policies suits your business usually only becomes clear once someone has looked at the details. You can get commercial combined insurance quotes through Kompare: you fill in a short form and a specialist FCA-authorised broker from the panel contacts you with quotes. Kompare is not an insurer and doesn't give advice; the broker can talk through which sections are included and whether any part is better placed on its own.
If a claim or sale goes wrong later, many small firms can take a complaint to the Financial Ombudsman Service. It can help micro-enterprises and small businesses; a small business, for this purpose, has annual turnover under £6.5 million and either a balance sheet under £5 million or fewer than 50 employees.