Understanding your business insurance requirements is an important step in protecting your company. While it might not be the most thrilling aspect of being an entrepreneur, following the right business insurance guidelines means you are prepared for unexpected events. Many business owners are unaware of their insurance obligations, which can leave them exposed to significant financial risks and legal issues.
This overview will help you understand the types of insurance you might need, so you can make informed decisions to protect your business.
Legal Requirements
Employers' Liability (EL) Insurance: You are legally obligated to have this cover as soon as you hire your first employee. This includes most types of employees, from full-time staff to temporary workers and volunteers. Failing to have employers' liability insurance can result in a hefty fine of £2,500 for every day you are without it. The legal minimum cover is £5 million, although most insurers offer £10 million as standard.
Commercial Motor Insurance: For those businesses that use vehicles, either owned by the firm or by the employee,, you’ll need this insurance with at least third party cover. This is another legal requirement as private vehicle insurance does not usually extend to business use.
Professional Indemnity (PI) Insurance: Technically PI Insurance is not always needed by law but for some professions, it’s a condition of work to hold this cover. This is governed by professional bodies and regulatory authorities who stipulate this practicing rule in those working in sectors such as accountancy, finance or law.
Important Insurances for Most Businesses
While not always legally required, some types of insurance are essential for protecting your business from common risks.
Public Liability (PL) Insurance is a must have for any business that interacts with the public. This could include customers visiting your premises, or you and your employees working at a client's site. It covers claims made against you for injury to a third party or damage to their property. While there is no legal minimum, cover levels generally range from £1 million to £10 million, depending on the nature of your business and the clients you work with.
Professional Indemnity (PI) Insurance is highly recommended if you provide professional services, such as consultancy, design or IT. This protects you against claims from clients who believe you have been negligent in your work, resulting in a financial loss for them. It can cover legal costs and any compensation you might have to pay.
Commercial Property Insurance - essential if you own the building but even if you only rent, you should consider business contents insurance. Damage or theft to property or contents can bring trade to a halt. Business Interuption Insurance is a cover that can also be very useful in protecting your business if it's forced to temporarily stop trading.
Cyber and Data Insurance is another insurance that reflects the modern business. This insurance covers instances of losses and costs associated with breaches and attacks on your data, along with customer contact of those affected.
Specialised Insurance for Specific Needs
Depending on your industry and business activities, you might need more specialised types of cover.
For businesses that manufacture or sell products, Product Liability Insurance is essential. This protects you if a product you sell causes injury to a customer or damages their property. It can be a financial lifesaver for businesses in the manufacturing sector.
If your business relies on its intellectual property, such as trademarks, copyrights, or patents, Intellectual Property Insurance can offer protection against infringement and theft. This ensures your brilliant ideas remain yours.
For those in the construction and engineering industries, Delay Insurance, also known as Advanced Loss of Profits insurance, can protect against financial losses caused by delays in a project.
Considering Your Business's Unique Needs
The right insurance for your business will depend on your specific circumstances. Here are a few things to consider:
- Working from home: Don't assume your standard home insurance will cover your business activities. Many home policies specifically exclude business use, so you may need a separate business policy.
- Business growth: As your business grows and changes, so will your insurance needs. Regularly review your policies to ensure they still provide adequate cover.
- Client requirements: Some clients, particularly larger companies or government bodies, may require you to have a certain level of insurance cover before they will work with you. Always check the terms of your contracts.
By taking the time to understand your business insurance requirements, you can ensure you have the right protection in place, giving you peace of mind and allowing you to focus on what you do best: running your business.
