Whatever business you’re in you’ll need to take out insurance. Here’s what you should know about the different types and how much business insurance you may require.
Disasters don’t just happen to other businesses. No matter how careful you are, accidents and incidents – such as fires, theft, illness and legal claims – can strike at any time. The results can include loss of income, unexpected outgoings and business disruption.
It’s easy to underestimate the problems that can be caused by major incidents. For example, a flood can damage - or even destroy – property, stock and equipment. It can also mean a loss of business if customers go elsewhere.
Making sure that you’ve got the right small business insurance and adequate levels of cover will help protect your business. And be aware: some types of insurance are not optional – if you don’t have them you’re breaking the law.
Of the many types of business insurance, two are compulsory.
Employers’ Liability Insurance
If you employ anyone other than yourself, you must have employers liability insurance of at least £5 million of cover, or more depending on your business activity. (For more details about exceptions see Employers’ Liability Insurance.)
Obviously, you need motor insurance for company vehicles – at least third-party. But don’t forget that if you or your employees use your own vehicles for business use – for instance, to travel to meetings – you need to make sure that you have specific additional insurance for this.
Direct from an insurance provider
Buying direct cuts out the ‘middle-men’ i.e. insurance brokers.Find out more
Through price comparison sites
You can buy business insurance through comparison sites, just as you can for home and car insurance.Find out more
Via an insurance broker
Brokers should be able to use their knowledge of a wide range of products from different insurance companies to identify policies that are right for your specific needs.Find out more
To start with you must have the two compulsory types of insurance:
If your products or services could potentially cause harm or damage you need public liability insurance. The vast majority of businesses – including tradespeople and shop owners – make sure they have this, and also in many cases, product liability insurance.
Although it’s not compulsory, you should also very seriously consider taking out building and contents insurance, and if you are a tradesperson, equipment insurance.
If your business is of a consultancy nature – e.g. solicitor, accountant, architect, adviser – as well as public liability insurance you will need professional indemnity insurance (PI) - read more on Professional Indemnity Insurance here. Some professional bodies will not accept you, and some clients will refuse to do business with you unless you have PI.
You may also need insurance that’s specific to your business. For example, a delivery company will need goods in transit insurance.
The price of insurance depends on things like:
For example, the price a building contractor pays for employer’s liability and public liability insurance may be different to the price paid by a cleaning contractor for the same types of insurance. The cost to a roofing business may be significantly more than the cost to a decorating business because of the different levels of risk involved. And insuring for a total liability of £20 million will usually be more expensive than for say £5 million.
Many insurance providers combine different types of policies in a single package aimed at particular business types, for example, plumbers’ insurance, beauty salon insurance, architects insurance, etc.
The advantages of a combined policy include:
But make sure that a packaged set of policies meets your specific needs. If it doesn’t, talk to your broker or provider about tailoring it so it gives you precisely what you need. Any extra specific risks can be covered by adding specialist cover from the same provider, or by taking out an additional policy with another insurer.
In most cases, if you have someone working for you, the law requires you to have employers’ liability insurance. Here’s what you need to know about this type of insurance.Read more
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