As a basic level, calculating an insurance premium is no different to calculating the price that needs to be charged for other types of goods and services. That price is based on the cost of providing the goods or services, plus a profit margin.
However, it’s not quite as simple as that when it comes to calculating an insurance premium. Because the insurance company doesn’t know what claims it will be called upon to pay during the period of insurance, it cannot know what its costs will be.
Although insurance companies don’t know how much they will have to pay out in claims in any particular year, they do have large amounts of data that they can use to predict the chance of a claim occurring and the likely size of any claims which do occur. The factors they base their predictions on are:
- You and your business
- What landscaping you will be doing
- What insurance cover you require
You & your business
Your past experience and qualifications will have an impact on the cost of your gardener public liability insurance. If you are qualified and have been trading for a number of years without having had to make any insurance claims, your insurance will be cheaper than it will be if you are new to the business, haven’t had any training or have made a number of claims in the past.
Some insurers will also use your credit score when determining how much to charge you for your insurance because they believe that if you have a poor credit score, you’re more likely to make an insurance claim.
What landscaping you will be doing
Some landscaping work is more hazardous than other types of landscaping. If you’re only landscaping residential gardens, your insurance will be cheaper than it will be if you’re working at height or if your landscaping activities involve major excavation work.
Where you are based and where you are working will also have an impact on the premium. In some areas, the risk of theft is higher and as such, in those areas it will cost more to insure your business property, such as your tools and equipment, because there’s a greater chance that you’ll have to make an insurance claim following a theft loss.
What insurance cover you require
The insurance cover you require affects how likely you are to make a claim because if you’re insured against more types of risk, you have more opportunities to make a claim.
That’s not to say that you should cut corners when deciding what insurance to purchase because, in the event of you having to make a claim, the premium you’ve paid will suddenly change from being just another business expense into a wise investment. You could save money by not buying personal accident & sickness insurance, for instance, but if you did that, you might struggle to pay your monthly bills if you were unable to work because you were ill or had been injured.
You’ll also pay more if you have more business property to insure because, in the event of that business property being damaged or stolen, the resultant insurance claim will cost more to settle. It’s important to insure for the full value of your business property, though, because you could be penalised in the event of a claim if you were found to be underinsured.
The liability indemnity limit will also make a difference. The indemnity limit is the maximum an insurance company will pay in the event of a claim, and higher indemnity limits mean higher insurance premiums because any potential claim could be more expensive to settle. Some clients insist on higher indemnity limits before they’ll allow you to work on their property, so paying the extra insurance premium can result in you being able to take advantage of more work opportunities.