A. Keith Stibbards of ACE writes:
In insurance jargon, what’s termed an ‘excess’ for motor insurance is termed a ‘deductible’ for commercial insurance.
It’s a surprising fact that deductibles are frequently lower for commercial insurance than for personal motor or household. For example, an average £40,000 to £50,000 commercial insurance premium will frequently have a £250 deductible on the property element. You can, of course, choose to have a higher deductible on most elements of your business insurance. However, you cannot legally have a deductible on Employer's Liability (EL) insurance. If you generally incur a large volume of small EL claims, alternative financial arrangements may be possible. It may, however, be more useful to review your health and safety arrangements to reduce the number of incidents occurring in the first place.
The advantage of electing for a higher deductible will be reflected by a reduction in your premium. The reason for this is premiums are calculated to incorporate not only the cost of paying out the claims, but also the administrative expense relating to handling the claims. Administration costs on small claims are proportionately higher so the effect on the premium can be significant. The emphasis for businesses, therefore, should be on buying insurance for those incidents that have a more damaging effect rather than picking up all incidental events.
Although insurers over the years have expanded their offerings to cover many different small events, and going back to basics and buying insurance for the major damaging events is certainly worthwhile if the overall cost of insurance is under review. Purchasing insurance with higher deductibles is one way of doing this