Premises Insurance

This Overheads code records the cost of premises insurance incurred in running the business. As an expense account, it normally carries a debit balance: debit entries increase the balance (recording new costs) and credit entries decrease it (for example, correcting an error or a refund received).

Real-world examples

Office — lower risk profile

An office-based business's premises insurance premium reflects a relatively low fire and liability risk — a £900 annual premium. Insurance is exempt from VAT rather than standard-rated, so there's no 2201 line at all: the entry is a debit of £900 to 7104 (Premises Insurance) and a credit of £900 to 2100 (Creditors Control Account). The premium does include Insurance Premium Tax, charged by the insurer, but that's baked into the price quoted rather than shown or reclaimed as VAT.

Restaurant with a commercial kitchen — higher risk profile

A restaurant with a commercial kitchen carries a much higher premises insurance premium than an equivalent-sized office, reflecting the greater fire and equipment risk of hot cooking oil, extraction systems and heavy kitchen equipment — a £3,200 annual premium against the office example above for a similarly sized unit. The accounting treatment is identical either way, a debit to 7104 and a credit to 2100 with no VAT, but the size of the premium itself is a genuine reflection of the trade being insured rather than anything about company size.

Commonly confused with

Because code 7103 (General Rates) sits right next to this one in Overheads, it's a common mis-posting target. Code 7104 is specifically for premises insurance, while 7103 covers general rates — similar in nature, but keeping them separate is what makes the overheads section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

An error posting to Premises Insurance won't change total overhead spend, but it will distort the overheads breakdown that's usually reviewed line by line each month to spot cost creep.

Other codes in Overheads