What is business contents insurance and do you need it?

Office equipment, furniture and the specific tools of your trade are fundamental to your ability to do business. Because of this, it’s important to take out the right insurance cover to protect these foundational assets. 

Let’s look at what business contents insurance is, which assets it protects and how you can find the best contents insurance for your particular business.

What does business contents insurance cover?

Business contents insurance provides protection for the assets that you house on your business premises. Your office, warehouse or workshop will contain items like furniture, fixtures, computers and IT equipment, as well as point-of-sale (POS), tools and equipment, and your physical business documents. 

Contents can even include the non-structural improvements you’ve made to a rented building – such as installed partitions or non-permanent walls to create meeting rooms, production areas, dark rooms or other spaces. 

What perils are you protected against?

The contents of your premises will be covered from a variety of different events and insurance perils. This will include theft, fire, flood, escape of water, storm and vandalism. You’ll typically be able to also add accidental damage to the policy. 

Where and when will your contents be covered?

As a general rule of thumb, the contents and named items protected by your business contents insurance will be covered while housed at your business premises.

However, for specific items – like tools and mobile equipment – you can add optional extensions for transit and temporary removal of named items. This helps to cover your tools and equipment while you’re out working on a customer job. 

What are the common exclusions, conditions and warranties?

Exclusions are specific items or perils that are not covered by your standard business contents insurance policy. Commonly, this will mean that things like wear and tear of equipment, defective workmanship and unoccupied premises are not covered. 

Conditions and warranties both define specific areas of your insurance contract.  A 'condition' of the business contents insurance policy is a contractual requirement that you must strictly comply with for the insurer to be legally obligated to pay out a claim. For example, you must have an insurer-approved security system fitted.

A warranty is similar but can be seen as a strict promise that you must abide by for the policy to be valid – for example, that your alarm system is functional and always set when the premises are closed. Failing to do so could invalidate a claim. 

How do you afford the cost of extra security requirements?

Adding a security system and other insurer-approved security requirements can be expensive, but will often be a condition of the insurance policy. 

Taking out a flexible short-term loan, like an iwoca Business Loan, helps you spread the cost of a security upgrade and cover the expense of the annual premium. 

Will contents insurance cover my business stock or cash?

Stock and cash are not usually included as standard through your business insurance policy. Typically, a contents policy will let you add extra stock insurance (with seasonal uplift) and money cover, so these assets are covered by your insurance. 

Make sure you check the limits for cash on premises and in transit, and the terms and conditions for cover of refrigeration deterioration for perishable stock.

Who needs business contents insurance in the UK?

Having business contents insurance is a fundamental need for many business owners. It’s a key way to protect your business assets against the threats of theft and damage – and the negative impact this could have on your ability to trade. 

But which businesses are most likely to need this cover?

• Any business with physical assets: If you have tools, static machinery or office equipment housed at your business premises, business contents insurance is a must. This will apply to retail shops, restaurants and cafés, beauty salons, office-based service providers, studios, clinics and workshops.
• Tenants with fit-out and/or tenants’ improvements: You’ll need contents insurance to protect any non-structural enhancements you’ve made to the building. That could be a shop that’s been fitted out within a leased building, or an office where you’ve added temporary spaces to the existing premises.
• Home-based businesses with dedicated work equipment: If you work from home, your business equipment is unlikely to be covered by your standard home contents insurance. You’ll need business contents insurance to cover items like work laptops and any other tools you may use. 

Note for landlords: If you’re a landlord running a buy-to-let business, it’s crucial to take out building insurance for the fabric of the building. However, it’s your tenants’ responsibility to take out home contents insurance to cover their own possessions. 

How much does business contents insurance cost?

The cost of your business contents insurance premium can vary significantly from business to business and industry to industry.

Prices can start from between £100 to £200 for an annual business contents insurance policy. Recent stats from NimbleFins state that the average cost for business contents insurance starts from around £136 a year for up to £25,000 of contents cover for a typical business (e.g., a shop)*

*price and policy details correct as of December 2024

What are the key drivers of insurance cost?

Many insurers will offer a base policy, but it’s likely that you’ll need to tailor that cover to fit the coverage limits and specific insurance needs of your own business. 

Let’s take a look at some of the key drivers of insurance costs:

1. Total contents value: The premium you pay is directly proportional to the maximum potential payout. If you have a higher total replacement value for your stock, equipment and contents, this will result in a higher premium cost.
2. Location and associated risk: Premises in areas with statistically higher rates of theft, vandalism or flood exposure are deemed higher risk by the insurance industry. As a result, if your business is situated in a high-risk area, you’ll see a significant increase in the price of your policy.
3. Level of security provision: Insurers want to know your premises are as secure as possible. Installing certified security features, like monitored alarms or secure shutters, reduces the likelihood of a claim, which can often lead to a lower price for your contents insurance.
4. Business type and industry sector: Trades that store high-value, portable goods, or companies that operate with flammable materials, are deemed higher risk. If you’re a jewellery business that stocks high-value gems, your contents insurance will be more expensive than other retail stores. 
5. Claims history: If you’ve made previous insurance claims, this is often seen as a strong indicator of future risk by insurers. A poor claims record will be viewed negatively and may lead to a marked increase in the renewal price.
6. Chosen excess on the policy: The excess is the self-insured portion of any loss. Choosing a higher voluntary excess lowers the insurer's liability for smaller claims, therefore reducing the annual premium.
7. Accidental damage add-on: This optional extension significantly broadens your cover to include losses from non-specified, sudden events (e.g., spilling coffee on a server). This additional risk exposure results in a premium increase.

What’s the cheapest way to get business contents insurance?

You can bring down the cost of your insurance by taking proactive steps to lower your risk. This can include fitting insurer-approved security measures, such as alarms and CCTV, and situating the business in a lower-risk area.

You can also bundle your contents policy with the public liability and business interruption cover that makes up a business insurance package. 

However, the most effective way to lower your insurance costs is to pay annually rather than monthly. When you opt to pay monthly payments, the insurer is essentially extending a loan for the full amount of the premium. Because of this, they will generally add interest and administrative fees to your monthly payment. 

Paying one lump sum on an annual basis avoids the interest and fees and gets you the most cost-effective price for your insurance cover. 

Taking out an iwoca Business Loan provides you with the additional capital needed to pay this annual premium. Flexible finance improves your cash flow position, covers your insurance costs and leaves extra funds to reinvest in the business. 

How can I calculate the right level of contents cover?

It’s vital that you take out the right level of insurance cover for the assets you currently hold in the business. Use replacement-as-new values and make sure you list all items, including any installation and setup costs. Don’t forget to factor in tenants’ improvements and any seasonal peaks in stock levels. 

Keeping your insurance cover limits updated and realistic stops you from being underinsured in the event of a specific threat or peril.

Do you need separate cover for buildings, stock or portable items?

Protecting your business assets means insuring every aspect of the company. But which elements of the business – from the building to your own stock and portable tools – do you actually need to insure?

Let’s look at which items you do need to cover:

• Buildings (structure of the premises): Insuring the fabric of the building is usually the freeholder’s responsibility. As a business tenant, you will generally insure your own contents and the fit-out of the premises. 
• Stock held in the business: Stock needs its own cover, with options for seasonal uplift and freezer deterioration. Your Inventory must be specifically valued and insured, with peak holdings in place to cover seasonal increases.
• Portable tools and equipment: Standard contents cover only protects items within the insured premises. If portable tools, laptops or specific equipment are routinely taken away from the business address to client sites, you’ll need to add ‘all risks’ cover or tools insurance. 

Can I insure business contents if I work from home?

Yes: many policies can be extended to insure your home offices, but you must disclose home working to your insurer from the outset. If an employee is working from home and using a work laptop, this won’t generally be covered by the employee’s home contents insurance. You may need to take out specific working-from-home cover.

Be sure to check the coverage limits for the policy and the required security conditions.

Is business contents insurance worth it for small businesses?

The very short answer is ‘Yes, absolutely!’. 

A fire or theft can be a business-ending event if you don’t have business contents insurance in place. Think about the cost of replacing every piece of equipment, every tool and every electrical device you use to run your business. The expense of replacing the entire contents of your business would be prohibitive and could stop you from being able to trade again. 

While contents insurance protects the assets on the premises, it’s also sensible to pair this cover with business interruption insurance. This cover protects your income during the time it takes to repair your workspace and begin trading and earning again.

For micro businesses, a combined policy that packages business contents insurance with public liability and employers’ liability insurance is a cost-effective solution. Having employers’ liability insurance is a legal necessity if you have any employees – whether that’s full-time, part-time or temporary. 

iwoca: cover your insurance costs with a flexible loan

Having business contents insurance protects the tools of your trade and makes it easy to get your business back up and running if the worst should happen.

If your cash flow position doesn’t allow for the required security measures and annual premium costs, a flexible iwoca Business Loan gives you a fast injection of capital.

With an iwoca Business Loan, you can:

• Borrow £1,000 to £1 million to invest in security measures
• Protect your business assets and equipment
• Repay the loan from 1 day to 60 months
• Pay no early repayment penalties

Apply for an iwoca Business Loan

‍