How Are Business Insurance Premiums Calculated?

If you’ve contemplated about how your business insurance premium is calculated than this is the article for you. We go into the key factors that are assessed when working out how much to charge businesses for their insurance. No fancy buzzwords, just business insurance information explained clear and simple. 

The type of business/ risk level 

Every business is unique, operates in its own way, is exposed to certain risks and performs its own business activities. These are key factors that are examined by underwriters when assessing the risk level of a business and how much the risk is worth. 

Some business activities will attract a higher premium because there is a higher risk of a claim occurring then another type of business and their activities which may be deemed a lower risk.  

The amount of coverage/ limit/ extras you select 

The type of insurance you select, the limit and any additional extras are also impacting factors when calculating a business insurance premium. The higher amount of coverage you select, the higher your premium will be.  

While it may be tempting to go with a lower limit to save on your premium, it is wise to take the time to consider the amount of coverage you have in place, and would this be sufficient cover if a claim were to occur.  

The number of staff 

With the more staff that you have working at your business, there is an increased chance for a claim to occur. The more staff that your business employees, the higher your premium is potentially going to rise. 

Claims history 

If you have made claims in the past, these will potentially impact the pricing of your business insurance premium. The type of claim, size of claim and details will be taken into consideration when calculating the level of risk your business may be. 

Business location 

Where your business is located can affect the pricing of your business insurance premium. Some areas may be deemed a higher risk than others and this may be due to things like natural disasters occurring in the area and crime rates for example. 

Security features of your business premises 

When you take out your business insurance policy, there are usually a series of questions that are asked about the risk of your business, one of these risk areas is the security features of your business. This is commonly asked when you are taking out a Building insurance* policy. 

The security features of your business are assessed and can determine the level of risk and impact the pricing of your premium. Factors like monitoring alarms, deadlocks and window locks are examples of the type of security measures that may lower the cost of your premium by having extra security steps in place. 


If your business is increasing its annual profit each year, then this says a few things to your insurer when calculating the premium. It demonstrates that your business may be taking on more clients, bigger projects and there is increased activity, which increases the opportunity and risk for a potential claim to happen. 

Excess selected  

The higher the excess you select, the cheaper your business insurance premium is likely to be, and vice versa.  

How much you insure your building / business contents for 

If you have Building insurance and Contents insurance* in place for your business, it doesn’t hurt to review these at renewal time. The amount of contents that you may have originally taken your policy out for may not be sufficient if you have purchased other business assets.  

While your premium may be higher when you increase how much you insure your business building and contents for, reviewing this may protect your business for the long run, and preventing your business being underinsured if a claim were to occur.  

There’s plenty to think about and calculate when you are a small business owner and at BizCover we love to lend a helping hand when it comes to getting your business insurance arranged. 

Whether you are renewing your small business insurance or buying your first business insurance policy, we are there each step along the way. We don’t believe in paperwork or complicated insurance lingo, just easy, online insurance at the click of a button. 

Visit bizcover.co.nz and get insurance for your small business without the stress so you can get on with your day. Rather have a chat over the phone? You can find us at 0800 249 268. 

*This information is general only and does not take into account your objectives, financial situation or needs. It should not be relied upon as advice. As with any insurance, cover will be subject to the terms, conditions and exclusions contained in the policy wording. © 2024 BizCover Limited.

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