Having adequate insurance is essential for every business, no matter how robust your security or safety processes. Some insurances are compulsory, whilst others are optional.
- Almost all employers must have employers' liability insurance, which protects against claims for employee accidents or illnesses suffered as a result of work. You can be fined £2,500 per day if you are not properly insured.
- If your business uses vehicles, you must at least have third-party motor insurance (although fully comp is more advisable).
- Professional indemnity insurance - which provides protection against claims from people who believe you've given them bad advice - is also compulsory for some businesses in the legal, accountancy and financial services sectors.
Most other types of business insurance policy are optional. Although they provide another overhead, they can help you to survive should your small business be faced with an unforeseen crisis.
Insuring your premises and people
Seriously consider buildings and contents insurance to protect your business from premises damage and stock losses caused by theft, fire or flood.
Another option is business interruption cover, which, in the event of a serious problem, can help you to carry on trading until your business gets back on its feet.
Many small businesses rely heavily on one or two key employees - which usually includes the owner-manager. Key person insurance protects the business against loss in the event of their absence through serious illness, injury or death.
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Insuring against legal costs
If members of the public visit your premises, or if you visit and work on their premises, consider public liability insurance. It covers damages and legal costs when a member of the public dies, is injured or suffers damage to their property.
Additionally, product liability insurance can cover the cost of damage or injury caused by products you make, sell or repair.
A legal costs insurance policy can cover other legal action your business may be involved in, such as defending a claim made by an employee at tribunal, or pursuing a supplier for breach of contract.
Preventing an insurance claim
While you can insure against many risks, it's better to prevent problems arising in the first place. Some of the key areas to examine include:
Getting advice on business insurance
As with all products, shop around for the best business insurance quotes. You may be able to combine common insurances into a cost-effective package.
You must also make sure you have sufficient cover. If something goes wrong, without adequate insurance, it could finish your business.
An independent insurance broker can help you identify key potential threats and find the right types and level of cover. Some brokers charge, but most are paid commission by the insurance company they recommend to you.
Comparing business insurance quotes
Different insurers may use slightly different names for various types of insurance that they offer. Insurance differs between business sectors, too. Indeed, Wikipedia lists over 90 types of insurance and provides useful explanations.
When shopping around for insurance, either directly or via brokers or via your trade body, it may be helpful to list the types of insurance that are recommended and then compare the level of cover and the cost involved. Below is a list to pick from:
Insurance you may have to have
- Employers' liability insurance
- Public liability
- Business premises
- Motor vehicle (eg for delivery vehicles)
- Any mandatory industry-specific insurance
Insurance you may need
- Professional indemnity
- Personal accident, or key person
- Business interruption
- Business contents (including customers' property)
- Business equipment, laptops, tools, plant and machinery
- Legal expenses
- Product liability
- Contract works
- Stock (and damage to it)
- Goods in transit
- Environmental liability
- Director’s & Officers
- Employee travel
- Intellectual Property (IP)
- Trade credit
- Glass and sign cover
- Fidelity guarantee (dishonest employees)