What business insurance do I need?

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.
 

To start with you must have the two compulsory types of insurance:

• Employers’ liability insurance – unless you meet conditions that exempt you, such as being the sole employee – see Employers’ Liability Insurance. 
• Motor insurance – Company motor insurance would only be needed if you are using a company vehicle. If you use your own vehicle make sure that your personal motor insurance policy covers travel for work purposes

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. 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:

• Your business activity
• The geographical location you work in
• The products or services you offer
• The total amount you want to insure
• The amount of excess you’re prepared to pay
• The number of claims you’ve made in the past.

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:

• Simpler administration in respect of premium payments, renewal dates and claims, because you are dealing with just one insurer.
• Avoidance of overlapping cover.
• Economies of scale, which can result in lower premiums.

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.