Insurance pricing is a mystery to most people. They know that it will cost more for a seventeen year-old to insure a sports car than it would for someone in their mid-40s, who has never made a claim, to insure a small hatchback. They know that bigger houses cost more to insure than smaller houses. But unless they work in the insurance industry, they don’t actually know how insurance premiums are calculated.
Business insurance is more complicated than household and motor insurance, but in terms of calculating the salon insurance premiums, the principles are the same. The factors that affect the insurance premiums are:
- you and your business
- the cover that you require
- the state of the insurance market
You & your business
Your insurer will view you as less likely to make a claim if you have many years of experience in your profession and all of the relevant qualifications. As such, they will charge you a lower premium than they will if you are relatively unqualified and just starting out.
Similarly, if you have made claims previously the insurer will view you as being more likely to make a claim in the future. Many insurers will view a single claim as a one-off and ignore it when they are calculating your insurance premium, but in general, the more insurance claims you have made, the more you will be paying for your insurance.
The nature of your business also affects whether the insurer will be likely to have to pay a claim and the potential size of such claims. If you are a relatively low-risk business such as a nail salon, your premium will usually be lower than it will be if you are a relatively high-risk business such as a salon providing quasi-medical beauty treatments.
The cover you require
In the same way that your household and motor insurance is more expensive if you opt for enhanced cover and optional extras, your business insurance will be more expensive if you opt for a comprehensive insurance package rather than settling for a bare-bones insurance package. Your insurance premium will be lower if you settle for an insurance package that only includes property insurance which covers your business property against losses due to accidental damage or theft, and public liability insurance which covers you if a compensation claim from the public is made against you.
However, obviously, the small up-front extra cost to extend the basic cover can prove to be an excellent investment if you find yourself having to make an insurance claim. Optional extras can include legal expenses insurance which protects your business against unexpected legal costs if it becomes involved in legal action, and personal accident & sickness insurance which protects your income if you are unable to work because you are ill or have been injured.
It’s also worth paying a little bit extra to get the enhanced cover that a bespoke salon insurance package provides. A bespoke salon insurance package should include a financial loss extension which provides cover for compensation claims involving purely economic losses rather than injuries and property damage, and a treatment risk extension which covers compensation claims arising out of professional activities. Both purely economic compensation claims and compensation claims arising out of professional activities are excluded from a standard insurance package.
The state of the insurance market
The insurance market is no different to any other market in the sense that supply and demand affects whether prices, in general, are high or low. When conditions are good more insurance companies are willing to quote for business, pushing prices down due to competition. Factors that determine how keen insurance companies are to quote include:
- Whether the economy is performing well
- Whether the stock market is performing well
- How many catastrophic – such as hurricanes or severe fires – there have been in the past year