Business, commercial and industrial insurance is usually sold on an annual basis.
You will go through the usual process of approaching brokers to obtain competitive quotes and this ends up with you choosing the most competitive commercial insurance quote.
For UK based risks you do not pay V.A.T., insurance is subject to a 5% (at present) levy called insurance premium tax or I.P.T.
So, lest say you are looking for combined liability, your brokers quotes you £1,000.00 per annum, plus the IPT, which gives a total annual premium of £1,050.00. But, if midway through the year you need to cancel the insurance, say you have merged with another company and you fall under their umbrella cover, you want to make sure you get back some of the premium paid.
The vast majority of package policies (shop insurance, office insurance etc) will give a pro-rata return, give or take £20 or £30 for an administration fee.
When we get to combined liability insurance and professional indemnity insurance, we need to be more cautious. A lot of insurers still offer this cover on a minimum and deposit basis. What this means is that, for example, if you accept the liability insurance quote, and it states M&D; or minimum and deposit, you are liable for the whole premium, even if you cancel after a few weeks.
It is understandable if businesses simply cancel their insurance midway through the year because they have a cheaper quote and an insurer charges a higher cancellation premium. But, if a hotel genuinely has to cancel their hotel insurance policy, why should they have to pay for cover they don’t need?
The Financial Services Authority has raised concerns about these types of policies and whether they really are in the interests of the customer. One of the main areas of the FSA’s work is “treating customers fairly”. Minimum and deposit premiums are not really in the spirit of TCF.
Be careful when looking for a business insurance quote that this is not on a minimum and deposit basis.