but unfortunately, it’s a necessary evil to give you peace of mind when and if things go wrong. Each business will require certain levels of insurance, whether this is a legal obligation, something your clients expect or require as part of a contract, or something you feel is needed for your business.
There are multiple insurers and brokers that will sell you whatever type of insurance you might need and may even sell packages for small businesses that combine those needs, but the first step is to really assess the risks and where cover is most required.
If your business has employees (even if it’s just one), you are legally required to have employer’s liability insurance. By law, you must hold a minimum level of cover of £5 million per claim.
This protects you, as the employer, and the employee against any injury, illness or disease incurred during the course of their employment with you. The insurance would normally cover you for any compensation claim made and legal defence costs incurred.
There are exemptions to this legal requirement:
Public Liability Insurance isn’t compulsory, except for certain establishments (e.g. restaurants), but is widely recommended and often expected. The insurance protects the company if a member of the public is injured or their property damaged in connection with your business.
This is particularly relevant if you have clients or customers who come to your premises. The level of cover varies depending on your industry and the risks associated with it.
If your business provides a service to customers, Professional Indemnity Insurance protects you against any errors or negligence you make that ultimately costs your client money. For instance, if you provide advice which turns out to be incorrect (and the fault is yours) and your client suffers a loss due to relying on such advice, they could make a claim against you.
Some contract terms will state a minimum of Professional Indemnity insurance you must hold to protect the services you are providing and can range from as little as £100,000 to tens of millions. There are particular professions where Professional Indemnity insurance is deemed compulsory, such as financial advisers, solicitors and accountants
If your company owns property, whether a warehouse, office or other commercial building, you should be insuring it against any physical threats (such as fire, water damage, etc). If you rent a property, you may be required under the terms of your lease to hold buildings insurance.
Working from a home office is not always covered by your home insurance, and you should check that you are covered for business use, especially if you have business visitors.
Similar to your home contents insurance, covering your business’ tools, equipment, computers and furniture is something not to overlook. Do you use a work laptop at other locations? Is it protected if you drop it or spill something on it?
Particularly, consider items that would mean your business could not function properly with out and whether your cover needs to cover them only at your business premises or UK or even worldwide. Never underestimate the cost of replacing the entire contents of your office if the worst were to happen.
Again, if you work from home, will your home insurance cover those vital items?
Where your business sells goods to a customer, and those products are lost, damaged or destroyed in transit, it would normally be the seller that bears the loss. You are able to take out insurance to cover against such losses.
Where you subcontract the freight/delivery services of a third party, double check the insurance they have to allow for an adequate claim to be made if necessary.
Motor Vehicle Insurance is a must for businesses who have fleet vehicles or vehicles owned and used by the company for business purposes. Where you are using your own personal vehicle for business purposes, you will need to contact your insurance company and ensure you are covered for business use as well (this is above and beyond commuting to and from a place of business).
Product liability insurance covers the cost of compensation claims if someone is injured or their property is damaged by a product that they have purchased from you. Its important to remember, that in some circumstances, you may be liable even if you haven't actually manufactured the product. For instance, if someone is injured using one of your products, whether its faulty or not fit for purpose, product liability insurance will protect you against a claim against your business for the design, production, manufacturer, and/or supply of the product. Again, when putting contracts in place, terms will often demand the need for product liability insurance (especially if you are the manufacturer).
It’s a complex area, and claims can be intricate and involve multiple parties, all who may have part liability.