Running a business involves risk. An accident could injure a customer, valuable equipment could be stolen, a fire could prevent you from trading or a client could claim that your professional advice caused them a financial loss.
The right business insurance can help protect your company against the financial consequences of these unexpected events.
However, there is no single insurance package that is suitable for every organisation. A self-employed consultant working from home will have very different requirements from a retailer, restaurant, construction company or manufacturer employing dozens of people.
Understanding the different types of business insurance available can help you identify where your greatest risks lie and build a policy around the way your company actually operates.
What Business Insurance Do I Need?
The insurance your business needs will depend on several factors, including your industry, number of employees, premises, equipment, interaction with customers and the products or professional services you provide.
You should also consider any contractual requirements placed upon you by customers, landlords, lenders, professional organisations or regulatory bodies.
Some businesses may only require two or three types of protection, while others need a much broader commercial insurance package.
The important thing is to insure the risks that could have a meaningful financial impact on your business rather than simply buying as many different policies as possible.
Employers’ Liability Insurance
If you employ people, Employers’ Liability Insurance is one of the first types of cover you should consider.
For most employers in Great Britain, it is a legal requirement.
Employers’ Liability Insurance can help meet compensation costs if an employee becomes injured or develops an illness because of the work they carry out for your business.
For example, an employee could suffer an injury while using machinery, fall from faulty equipment or develop a work-related illness following exposure to harmful substances.
Businesses that are legally required to have Employers’ Liability Insurance must generally have at least £5 million of cover from an authorised insurer.
There are limited exemptions, including some businesses that only employ qualifying family members, but you should establish whether an exemption genuinely applies before deciding not to arrange cover.
Public Liability Insurance
Public liability insurance can protect your business if a member of the public suffers an injury or damage to their property and your business is held legally responsible.
Imagine that a customer slips on a wet floor inside your shop and is injured. Alternatively, a tradesperson could accidentally damage a customer’s property while completing work.
A resulting claim could involve compensation and legal expenses.
Public liability insurance is particularly important for businesses that regularly interact with customers, suppliers or other members of the public.
This could include retailers, restaurants, salons, builders, tradespeople, contractors and many other businesses.
It is not generally compulsory by law, but customers and contractors may insist that you have a particular level of cover before they agree to work with you.
If you regularly tender for contracts, check the insurance requirements carefully.
Professional Indemnity Insurance
Businesses providing professional expertise, advice, designs or services should consider professional indemnity insurance.
A customer may claim that your advice, mistake, omission or professional service caused them financial loss.
Even if you believe you have done nothing wrong, defending an allegation can involve considerable legal expense.
Professional indemnity insurance can provide protection against certain compensation claims and defence costs arising from professional errors or negligence, subject to the policy terms.
It can be particularly relevant to consultants, accountants, designers, architects, surveyors, marketing professionals, IT businesses and other organisations whose clients rely on their specialist knowledge.
For some professions, regulators, professional bodies or contracts may require particular levels of professional indemnity cover.
If your business provides professional advice or services, you can read more about whether you have the right cover in place for professional liabilities.
Business Buildings Insurance
If your business owns commercial premises, the building itself could be one of your most valuable assets.
Business buildings insurance can provide financial protection if the property is damaged by an insured event such as fire, flooding, storm damage, escape of water or vandalism.
Depending on the policy, cover may include the cost of repairing or rebuilding the property.
If you operate from rented premises, responsibility for insuring the structure will often rest with the landlord, although this should never simply be assumed.
Check your lease to establish which parts of the property you are responsible for insuring.
You may also need separate insurance for improvements, fixtures or alterations that belong to your business.
Business Contents Insurance
While buildings insurance protects the structure, business contents insurance protects many of the things kept inside it.
Depending on the policy, this could include office furniture, computers, equipment, appliances, stock and other business possessions.
Consider how much it would cost to replace everything your business relies upon following a major fire, flood or theft.
Even a relatively small office can contain thousands of pounds worth of computers, furniture and specialist equipment.
Businesses should therefore calculate their contents value carefully rather than simply choosing an arbitrary amount of cover.
Tools and Equipment Insurance
For tradespeople and contractors, tools can be essential to earning an income.
If valuable power tools or specialist equipment are stolen or damaged, replacing them quickly can be expensive.
Tools and equipment insurance can provide protection against specified risks, depending on the policy.
Pay particular attention to conditions applying to equipment stored in vehicles overnight. Policies can impose security requirements and restrictions concerning where the vehicle is parked and how tools are stored.
Product Liability Insurance
If your business manufactures, distributes, supplies or sells products, product liability insurance may be important.
A defective product could injure somebody or damage their property, leading to a claim against businesses involved in its manufacture or supply.
You do not necessarily have to manufacture the product yourself to face potential liability.
Retailers, importers, wholesalers and distributors can also encounter product-related claims depending on the circumstances.
Product liability insurance can provide financial protection against certain compensation and legal costs if your business is found legally liable.
Business Interruption Insurance
Property insurance can help pay for physical damage, but what happens to your income while the business is unable to operate?
This is where business interruption insurance can become valuable.
Imagine a fire causes serious damage to your premises. Buildings and contents insurance may pay for insured repairs and replacement equipment, but you could still experience weeks or months of reduced trading.
During that period you may continue to face expenses such as wages, rent, loan repayments and other overheads.
Business interruption insurance can provide protection against certain losses of income following an insured event and may help cover additional costs involved in keeping the business operating.
Choosing an appropriate indemnity period is important. Major damage can sometimes take considerably longer to repair than originally expected.
Business Legal Expenses Insurance
Legal disputes can be expensive, even when your business has a strong case.
Business legal expenses insurance can provide access to legal assistance and help meet certain costs associated with insured disputes.
Depending on the policy, protection may be available for specified issues involving employment, contracts, property, tax investigations or other legal matters.
It should not be assumed that every dispute will automatically be covered.
Check the policy wording to understand exactly which circumstances are included and whether conditions apply before legal action is taken.
Personal Accident Insurance
For business owners and self-employed people, being unable to work following a serious accident can have immediate financial consequences.
Personal accident insurance can provide financial benefits following certain accidental injuries covered by the policy.
Depending on the cover selected, benefits may be available following temporary disablement, permanent disability or accidental death.
This can be particularly relevant to sole traders and people working in physically demanding occupations where their ability to work directly determines their income.
Cyber Insurance
Modern businesses increasingly depend on computers, cloud services, websites, online payments and customer information.
That creates additional risks.
A cyber incident could interrupt your systems, compromise sensitive information or prevent customers from accessing important services.
Cyber insurance can provide protection against certain financial consequences associated with cyber attacks, data breaches and other insured technology-related incidents.
The appropriate level of cover depends heavily on how your organisation stores information and relies on technology.
A small online retailer processing customer information could have very different cyber risks from a traditional business that uses computers primarily for administration.
Directors’ and Officers’ Insurance
Directors and senior managers can sometimes face allegations relating personally to decisions they make while running a company.
Directors’ and officers’ liability insurance, commonly called D&O insurance, can provide protection against certain claims made against directors, officers and other senior individuals arising from their management responsibilities.
This type of insurance can become increasingly relevant as a company grows, takes on employees, attracts investment or enters into more complex commercial arrangements.
Stock Insurance
Businesses holding significant quantities of stock should consider how much it would cost to replace those goods following theft, fire, flooding or another insured incident.
Stock insurance may form part of a wider commercial contents policy rather than being purchased separately.
Seasonal businesses should pay particular attention to maximum stock values.
For example, a retailer may hold considerably more stock immediately before Christmas than during quieter periods of the year.
Your insurance should reflect the maximum amount realistically held rather than an average figure that could leave the business underinsured during peak periods.
Do I Need Business Insurance If I Work From Home?
Running a business from home does not automatically mean that your ordinary household insurance will provide suitable protection.
Standard home insurance policies can restrict or exclude certain business activities, equipment, visitors and stock.
If you work from home, tell your insurer what you do.
Someone carrying out occasional administrative work from a laptop presents a very different risk from somebody storing commercial stock, meeting clients or operating specialist equipment from their property.
Depending on your activities, you may need business equipment, public liability, professional indemnity or other commercial insurance in addition to your household cover.
What Business Insurance Is Legally Required?
For most businesses, the principal compulsory commercial insurance requirement arises when you employ people.
Most employers in Great Britain must have Employers’ Liability Insurance with at least £5 million of cover.
Businesses operating vehicles must also make sure appropriate motor insurance is in place for business use.
Beyond these requirements, the insurance you need will usually depend on your activities, contractual obligations, industry and individual risks.
Something being optional by law does not necessarily mean it is unimportant.
For example, public liability insurance may not normally be legally compulsory, but a major liability claim without insurance could have serious financial consequences for a small company.
How Much Business Insurance Cover Do I Need?
There is no universal amount of business insurance that suits every company.
When determining appropriate limits, consider factors such as the number of employees you have, the maximum value of property or stock at risk, the size of contracts you undertake, the potential value of third-party claims, the value of your premises and equipment, your annual turnover and the length of time your company could survive without normal income.
Some customers may also specify minimum insurance limits in their contracts.
A large commercial client might, for example, require contractors to maintain several million pounds of public liability insurance before allowing them onto a site.
Avoid Being Underinsured
One of the biggest mistakes a business can make is arranging insurance based purely on achieving the lowest possible premium.
If the values declared to your insurer are substantially lower than the real amounts at risk, you may be underinsured.
That could affect how much the insurer pays following a claim.
Review the replacement value of equipment, stock, contents and buildings periodically and update your insurer when the business changes.
Business growth is positive, but it can also mean that an insurance policy originally purchased several years ago is no longer suitable.
Review Your Business Insurance When Your Company Changes
Your insurance should develop alongside your company.
Review your policy if you employ additional staff, move premises, purchase expensive equipment, increase stock levels, start selling new products, introduce new services, work in different locations or significantly increase your turnover.
Do not necessarily wait until the annual renewal if there has been a substantial change.
Tell your insurer or broker so they can determine whether the change affects your existing protection.
Should You Use a Business Insurance Broker?
Commercial insurance can become complicated because multiple forms of protection may need to work together.
A broker can discuss how your business operates, identify key exposures and help you arrange insurance suited to your requirements.
This can be particularly useful where your company has unusual risks, operates across several locations, undertakes specialist work or requires specific insurance levels to meet contractual requirements.
Rather than simply comparing premiums, consider the cover, limits, excesses, exclusions and policy conditions being offered.
Protecting Your Business With the Right Insurance
Business insurance is about protecting the organisation you have worked to build.
The right combination of cover can help protect your employees, customers, premises, equipment, income and financial position when something unexpected happens.
However, appropriate protection starts with understanding the risks your particular company faces.
At West Craven Insurance, we can help you assess those risks and arrange a business insurance policy tailored around the way your organisation operates.
Whether you are starting a new business, employing your first member of staff or reviewing the insurance of an established company, speak to West Craven Insurance about finding appropriate business cover.
