A guide to small business insurance
28th May 2019
Most business owners know that business insurance is an important consideration, but with so many different covers to choose from, it can be difficult to know where to start. We’ll explain the purpose of business insurance and run through some of the key covers, so that you can make sure your business is protected.
Why do I need business insurance?
Like any insurance, business insurance is there to protect you if something goes wrong. Depending on the type of cover you buy (more on that below) it could pay out if your business premises was flooded, for example, or if a customer tripped up in your shop and made a compensation claim against you. Without insurance, you’d have to pay for things like repairs, legal fees and compensation claims out of your own pocket, which could threaten your business.
Apart from employers’ liability insurance, most types of business insurance aren’t required by law. However, there are other situations in which particular business insurance covers are mandatory. For example, your trade or regulatory body may require you to have a certain level of professional indemnity cover, the lease for your business premises may require you to take out business buildings insurance, or you may win a government contract that specifies a certain level of public liability insurance.
Types of business insurance
There are lots of different business insurance covers available, and you can usually choose to buy them individually or as part of a single comprehensive policy. Here’s a run-through of some of the main types available.
Employers’ liability insurance
Let’s start with the business insurance cover that’s a legal requirement for most employers. Employers’ liability insurance can pay out if an employee makes a claim against you because they’ve suffered illness or injury as a result of their work. For example, if an office worker made a successful compensation claim against you for repetitive strain injury (RSI).
Apart from a few exceptions, employers’ liability insurance is compulsory for any business that has employees, even if these are casual or temporary workers or contractors. The penalties for not having this cover are steep: you could be fined £2,500 for every day that you don’t have it in place. To reduce the chance of a claim and to make sure your cover is valid, it’s important to abide by all health and safety regulations and carry out regular risk assessments.
Professional indemnity insurance
This insurance covers you if a client seeks compensation because they think you’ve made a mistake in your work that has caused them to suffer a financial loss. For example, your client may believe that you’ve mishandled data, given inaccurate advice, or violated copyright. This makes this insurance particularly important for businesses that offer professional advice, such as accountants, designers and architects.
Public liability insurance
Public liability insurance can pay out if a member of the public such as a customer or a passerby makes a compensation claim against you for damage or injury. For example, if you run a construction company and one of your workers drops a brick from scaffolding and damages a car parked below, or if a customer at your hairdressing salon trips over a trailing wire and suffers an injury. There’s also product liability insurance, which can cover you if a product you manufacture or sell is faulty and causes damage or injury.
Business contents insurance and stock insurance
You may also want to consider insuring the items that you need to keep your business running. Business contents insurance can pay to replace your business equipment if it’s lost, stolen or damaged, and it can cover furnishings at your business premises too. Stock insurance can pay to replace your stock in the event of it being stolen, damaged or destroyed.
Other types of business insurance
There are lots of other types of business insurance available too, including personal accident insurance, business interruption insurance and business buildings insurance. Think carefully about which covers you may need for your business and build a tailored policy that fits your needs.
Top business insurance tips
Follow these top tips to make sure you have the right insurance for your business:
- Think about some “worst case scenarios” that your business could encounter, and then find the insurance covers that could protect you if these events played out.
- Take a look at your client contracts to see whether they specify particular types of insurance and/or levels of cover.
- Always give accurate and honest details about your business when you’re getting insurance quotes, as any inaccuracies may mean you’re not covered if you come to make a claim.
- Using a broker like Simply Business can save you save time by allowing you to compare a range of quotes in one place.
- Once you’ve bought your insurance, read your policy documents carefully and keep them in a safe place so that you fully understand your insurance coverage and you know how to make a claim.