The location of your business can affect everything from your local competition to customer loyalty. When setting up shop for the first time (whether that shop is actually an office, bakery or salon), it’s easy to get lost in the obvious pros and cons of your location choices. But what about your insurance premium?
How does your postcode affect your insurance cover?
Insurers adjust premiums according to the levels of risk associated with your geographical area based on past claims. Postcode areas with a higher risk of burglary, crime, flooding and accidents will have a higher cost of insurance. Depending on where in the United Kingdom your business is located and the type of insurance being purchased, it can be up to five times the cost of if you were located elsewhere.
Particularly if your business is situated in a high crime area, you may be deemed as high-risk to your insurer. Postcode ratings are assessed differently by different insurers, so premiums can differ widely between insurers for the same cover in the same postcode. This is why we always recommend that you shop around for your business insurance cover to see if you can get it cheaper elsewhere.
Environmental risks are one of the highest contributors to the cost of your business insurance. If you’re in an area that’s associated with a high risk of flooding or storm damage, then this will be accounted for in the cost.
You can see, for example, in the map of England below how “hit or miss” it may be that your business postcode is located in an area with a high risk of flooding:
The map above is taken from www.checkmyfloodrisk.co.uk, where you can enter your postcode or browse to see which areas are considered high risk. It might be that just a five minute walk down the road will take you from an environmentally high risk area to a low risk area.
It also depends on the type of insurance that you are purchasing. Building insurance, auto insurance and insurance for various industries will all have data on postcodes that have historically claimed the most on that type of insurance, and are therefore most likely to claim again. Areas of London and Greater London, for example, account for almost three quarters of the country’s postcodes that have claimed for burglary insurance in the past. So due to the presently high risk of burglary in those areas, you may have to pay more for your insurance than someone operating their business from a rural area.
However, location is but a single factor that contributes to the price of your insurance. For more information, you can read our post on “How is my Business Insurance premium calculated?”.