Self-employed insurance costs vary depending on the type of insurance policies the business owner needs. There is no one size fits all policy and the products needed will depend entirely on the type of work they do, so self-employed insurance costs can range from under £100 to many thousands of pounds a year.
Insurance policies a self-employed business needs to consider are:
- Public liability
- Contents insurance
- Business car use
- Professional indemnity (AKA professional liability)
- Employers’ liability
- Cyber insurance
- Tax investigation and legal expenses
- Personal accident
The most common self-employed insurance product is public liability insurance, which protects the business if they are blamed for a member of the public or other third party’s injury or property damage. It covers not only compensation but the associated legal costs.
According to NimbleFins research on the cost of business insurance, public liability insurance can cost as little as £50 for a self-employed person in a low-risk profession such as a tutor, but can rise to more than £80 for higher-risk professions such as manual workers or event organisers. Looking across a number of professions wanting up to £2 million in cover (a common amount of coverage), the average price was £65 according to research by insurance experts NimbleFins.
They also found that the average cost of business contents insurance can start at £136 for £10,000 of cover, and rises to around £200 for £500,000 of cover. The more cover you have, the cheaper it works out at per £10,000 of coverage.
Car insurance covering ‘business use’ driving does not usually cost a lot more than a standard policy, but it will be a bit more expensive. However, commercial vehicle insurance is much more expensive, with costs coming in at about 2.75 times the amount of car insurance with business use. Research suggests commercial vehicle insurance can cost £2,000 or more depending on the value of the vehicle.
Professional indemnity insurance, explained in more detail below, is not needed for every business. Costs vary wildly depending on the industry the self-employed business operates in and can be as little as £50 or more than £1,500, even for a self-employed person.
Employers’ liability insurance, which is needed for most types of employee, costs about £60 for a low-risk worker, but can be more than £200 per employee for a higher risk industry. As explained in more detail below, not every worker needs to be covered by this insurance, but it is legally required for those who qualify. And there’s good news as the cost per employee decreases the more members of staff a business has.
According to NimbleFins research, cyber insurance starts at about £132 a year for a basic package, but businesses can pay more for additional extras such as emergency contacts, or if they hold lots of sensitive data.
Legal expenses cover starts at about £72 a year and covers legal disputes not already covered by other policies, such as tax investigations, debt recovery, contract disputes and more.
Personal accident insurance, which provides a financial payment if the self-employed business owner is injured and can no longer work, costs about £65. More people can be covered if necessary and it also provides a benefit if the worker dies. This insurance usually only covers work-related injury or death, but some (more expensive) policies can cover an injury sustained anywhere.
A business may also wish to look at product liability insurance if they are selling goods to customers. This covers design and manufacturing defects or claims of a warning label error.
How much is liability insurance for self-employed?
Liability insurance encapsulates a number of different risks and in the UK it is divided into public liability insurance, professional liability insurance and employers’ liability insurance. Self-employed businesses do not necessarily need all three types. If a business hires staff, the most important self-employed liability insurance to look at is employers’ liability insurance.
Employers’ liability insurance is required by law for any business with permanent staff, or those which the business deducts national insurance and income tax from. The full list of qualifications and exemptions can be found here.
Employers’ liability insurance is the most expensive type of insurance. One employee will cost on average £213 to cover if they work out on the field, or as little as £60 if working in an office, according to research. However the cost per employee reduces significantly the more staff a business has.
Aside from employers’ liability insurance, the most common insurance product is public liability insurance. The average cost for a self-employed business is about £65, but can go up or down depending on the nature of the work. The standard maximum cover taken out by businesses is £2 million, although can be sold with £1m, £5m or more, which again would see costs differ.
Public liability insurance is not needed for every self-employed business. If they are not coming into contact with the public it may not be needed. A software developer who works at home and conducts their client meetings virtually will likely not need public liability insurance. But a self-employed curtain maker who has a shop and enters customers’ homes will need public liability insurance as there is a risk of injury or damage to property.
The other type of liability insurance is professional liability insurance, also known as professional indemnity insurance. Again this is not needed by every business, but is a wise addition if selling advice, expertise or knowledge. If a decision or advice given turns out to be the wrong call and costs the client money, they can sue for compensation. For example if an accountant gave the wrong advice which left their client with an unforeseen tax bill they could be sued for negligence with compensation sought.
Professional liability insurance starts at about £80 a year. For some trades it is essential to gain accreditation or membership to their industry body.
- Accountants (Institute of Chartered Accountants in England and Wales)
- Architects (Architects Registration Board)
- Financial Advisors (Financial Conduct Authority)
- Healthcare professionals (NHS)
- Insurance brokers (Financial Conduct Authority)
- Solicitors (Solicitors Regulation Authority)
- Surveyors (RICS)
- Plumbers (Association of Plumbing and Heating Contractors Limited (APHC)
Professional liability insurance costs vary wildly from £50 to £1,500 depending on the industry, with architects facing the highest bills because the cost of potential errors are so vast. And a large architect firm could see quotes in the tens of thousands of pounds. The cost of insurance will also depend on the location the business operates (e.g. Foreign locations may have different risks), claims history, number of employees, and the level of cover needed. Some industry bodies that require professional liability insurance will also demand a minimum amount of cover, for example the Architects Registration Board requires a minimum of £250,000.
Research by insurance experts NimbleFins found the average cost for professional indemnity insurance with £2,000,000 of cover starts from around:
- Independent financial advisor: £47
- Software developer: £114
- Management consultant: £174
- Commercial builder: £300
- Architect: £1,374