When you start a business, there are several types of business insurance available to protect you and your business, some compulsory and some voluntary. Having the right ones in place can avoid costly payouts should things go wrong, so it is worth taking the time to decide what you need.
How it works
You can buy policies either direct or through a broker, in person or online. Some brokers specialise in insurance for small businesses so can offer a combined package that incorporates all the different elements you need, but always shop around to make sure you are getting the best deal. Here is a guide to what you may need:
1. Contents insurance
If you are running your business from home, your existing home contents insurance policy might not be sufficient to cover such things as business equipment and stock, so you will need to upgrade it from a domestic policy to a business policy. You should also make sure all business equipment taken out of the home is adequately covered, such as laptops, smartphones, iPads and so on. It’s always best to be upfront with your insurer about what you are doing and what you will need cover for because otherwise, you could find yourself seriously out of pocket if you ever need to make a claim. An event such as a fire or flood, for example, could cause many thousands of pounds damage to stock and equipment.
2. Professional indemnity insurance
If you are running a business which offers a service or advice – for example as a consultant, architect or accountant – then taking out professional indemnity insurance is vital because it will cover you for claims of negligence and for giving poor advice; including libel and slander, malicious falsehood, misrepresentation, errors, omissions and unintentional breach of confidence. If you don’t have it, a mistake could cost you a lot of money in compensation. Also, clients may want check that you have an up to date professional indemnity policy in place before they work with you. Before taking out a policy, it may be worth finding out what level of cover clients expect.
3. Public liability insurance
You will need public liability insurance if members of the public or customers come to your place of work, or if you go to theirs, to protect your business from any claims made against it for loss or injury. If you run a painting and decorating business and a client trips over your paint pot, for example, then public liability insurance would cover you for any compensation claims made against you.
You may be automatically covered for public liability insurance through membership of a trade body or professional organisation. Equity, the actors and performers union, for example, provides cover of up to £10 million for its members at no additional charge.
4. Employers liability insurance
Employers liability insurance is compulsory for anyone taking on an employee, whether permanent, temporary or seasonal. The only exception is if you work at home and are hiring a close relative such as a parent, child or sibling to work with you. The insurance is designed to protect the business owner from any claims arising from illness or injury sustained by an employee in the workplace. Most insurers will automatically provide cover of £10 million, which should be more than enough for a small business.
5. Tradesman insurance
If you are a tradesman working in other people’s homes, it is particularly important to ensure that you have sufficient insurance in place. As well as public liability insurance, you need to ensure you are covered for any damage to property, or any injuries caused, plus personal accident insurance to cover medical expenses and loss of earnings if you are injured while at work.
6. Car insurance
You may need to upgrade your existing car insurance to cover you for business use as well as social use, particularly if you are going to be running a business which involves driving clients around, for example, an estate agency.
Things to consider
If you run an online business selling products via the internet, you will also need to take out product liability insurance to cover you for any damage or injury that your products may cause. Even if you have not manufactured the products yourself, you could still be liable for compensation claims if the product bears the name of your business, or if you have changed the product in some way. You will also need some level of stock cover in case the stock you hold is damaged or stolen.
Always be upfront with your insurer about what you need to cover because if you don’t, then you could face a nasty shock in the event of a claim if your policy is deemed to be inadequate or invalid.
Useful Resources – Association of British Insurers