Buying insurance for your business, whether you’re a tradesman working from home or have a number of employees based in dedicated premises, can be confusing. No matter how much you’d prefer not to think about the possibility of things going wrong, well-selected insurance can provide some peace of mind that you’ll be covered if the worst should happen.
Every business is different, but your business’s insurance needs will generally depend upon what it does, its structure, location and whether you have employees. A professional insurance broker can help you decide the type and level of insurance cover that best meets your company’s needs, but in this article we take a quick run through the main types of business insurance you might consider. We also have a number of detailed articles on different types of insurance if you’d like more information.
First we’ll look at the physical assets that your business needs to protect and then move on to other possible types of insurance you’ll need for your business.
If you own a commercial building, you need to insure it against physical threats like flood and other water damage, fire, explosion etc. If you’re using your home for business purposes, check that you’re covered for the business use – many insurers offer combined policies which include both home and home office insurance.
When you rent commercial premises, it’s best to check the terms of the lease to identify who has responsibility for insuring them – you or the landlord.
Think about insuring any business tools and equipment, computers and other items. Just like with your home contents insurance, take care not to underestimate the value of everything you need to run your business – the sum insured should reflect the replacement cost. Pay particular attention to expensive equipment that your business cannot function without. You’ll also need to consider whether you just need cover on business premises or if you need wider cover– for example, if laptops are removed from an office and used off site.
If your business is home-based, you’ll need to check the terms of your home insurance policy. It’s likely that your existing insurance will need to be updated or replaced to cover equipment used in the course of business.
If goods being sold are lost, damaged or destroyed in transit, it’s usually the seller that bears the loss. Insurance can, however, be taken out specifically to cover goods in transit if it’s not covered by another policy.
If your business uses another company to carry goods, they should have their own insurance in place. Even if that’s the case, check the contract you have in place with them to make sure you can make an adequate claim against them if they cause loss or damage to your goods.
If you use a vehicle for business purposes, you’ll need to have motor insurance in place. Specialised policies for commercial vehicles are available, particularly for specialised vehicle types (e.g. tractors) or a fleet of vehicles.
Even if you’re using your private vehicle, you’ll need to liaise with your insurance company to ensure you’re covered in using it for commercial purposes. You may need to upgrade your existing cover, because insurance companies generally charge more for business use than private use of a vehicle.
If you have one or more employees, there is a legal requirement to buy employers’ liability insurance. This protects you against been sued for physical injury, illness or disease incurred by your employees during the course of their employment.
The minimum level of cover for an employers’ liability insurance policy is £5 million although most policies provide a higher level of cover, with £10 million typical. As damages can be substantial, without cover in place you’re not only breaking the law but a valid claim could put you out of business.
If you provide a service to customers, professional indemnity insurance can protect you against claims of errors and negligence that cost your clients money. So, for example, if you give poor advice that means your client is worse off as a result, the value of a claim could be met by a professional indemnity insurance policy.
Professional indemnity insurance tends to be associated with certain professions where it is compulsory – such as financial advisers, solicitors and accountants – but can also be useful for services such as IT or marketing consultancy. In some such cases, clients will check whether you have professional indemnity insurance in place before working with you.
Public liability insurance protects the company if a member of the public is injured or their property damaged in connection with your business: this cover provides compensation to a claimant if the business is found to be at fault for an incident. You should consider taking out public liability insurance if people come into your premises, you enter other people’s premises in the course of your business or otherwise come into contact with the public.
Public liability insurance is not compulsory, except for horse riding establishments. However, many companies and government bodies will not work with suppliers or allow contractors into their premises unless they have such insurance in place. The amount of cover required will depend on the type of business you do, with more dangerous types of activity generally requiring more cover.
Product liability insurance will meet the cost of compensating someone injured by a faulty product that your business designed, made, supplied or sold. Usually it will be the manufacturer who is liable, although other companies involved in the supply of the product may be sued in some circumstances.
This type of insurance is particularly important for certain types of product and the cover can be specialised to the type of goods or service made or supplied. You’ll often find that you’ll need to have product liability insurance when supplying your product – most supermarkets will require you to have appropriate cover in place as a condition of doing business with you.
While other types of insurance should cover the cost of rebuilding property and replacing stock and equipment if a disaster like a fire occurs, that will all take time and it’s likely that your ability to trade normally will be restricted in the meantime – so you might have little or no income coming in but still have staff to pay and other costs to meet.
Business interruption insurance provides for any such loss of profits or revenue while you’re unable to carry out your business as usual. It can be used to put the company back into the position it was before a disaster occurred and see you through until normal service is resumed.
Many of the above policies are offered in combination as part of a combined business insurance package. This can prove much cheaper and easier to manage than taking out a number of separate policies, particularly when a package is specifically designed for a particular trade or business (e.g. hairdressing). However, it’s still important that a package meets the individual needs of your business so do ensure you’ve properly considered what you need and that it’s covered by any package you buy.