Five things entrepreneurs should know about insurance

Five things entrepreneurs should know about insurance

Posted: Fri 26th Aug 2022

Insurance is a crucially important part of running a business and a potentially tricky one to get your head around.

Fortunately, legal expert and adviser on Enterprise Nation Michael Buckworth takes a look at the key considerations every entrepreneur should be aware of.

Connect with Michael on Enterprise Nation today, and be sure to also head over to Buckworths for extra legal advice.

1. Primarily manage risk in contracts

You can manage risks in your contracts or agreements with your customers and suppliers by adding tailored provisions that exclude or limit your liability if something goes wrong.

If you do not have an agreement in place with your customers or suppliers, you have unlimited liability for any losses they suffer or cause to you.

Having well-drafted and robust agreements in place provides you with the best protection against claims and will reduce the cost of your insurance overall.

2. Get the correct insurance

There are all sorts of tailored insurance covering a multitude of weird and wonderful risks, but only get those that are relevant to you, making sure it is specific to your business' needs.

For example, professional indemnity insurance covers losses caused by your negligent advice, so is probably not relevant for a food-based start-up. However, public liability insurance, which covers death and personal injury suffered by customers, suppliers and visitors to your premises may be useful if you have a bricks-and-mortar shop.

3. Check for sneaky policies

Insurance policies often contain exclusions (i.e. things that are not covered by the policy). Some of these are obvious – you are not covered for your own fraud or if you break the law – but others can be problematic and well-hidden.

For example, if you have your watch stolen on holiday, you will not be covered by insurance unless you file a police report and get a crime reference number.

Always read the policy to ensure that you understand any exclusions.

4. Make sure you can cover multiple claims

When you set up your start-up, you will likely get entry-level insurance and exclude all your liability in your customer agreements.

However, as your business grows, and you work with bigger clients, they may ask that you agree to be liable for certain types of loss – if you agree to this you should be capping your liability.

Your insurance must cover you for any claims that could be brought within the cap, you must also make sure that you are covered if you suffer multiple claims as insurers can impose a maximum cap for all claims on a policy.

5. Make sure your suppliers have insurance in place

If a supplier makes a mistake that causes a client to sue you, it will be your insurer that pays out and your premiums affected.

To prevent this, you will want to ensure that your supplier has insurance in place. You should also consider including an indemnity in the agreement with your suppliers giving you direct recourse against them (and by extension their insurer) if certain things go wrong.

It is far better to be able to claim against someone else’s insurer than against your own.

Relevant resources

I am a qualified solicitor of the Supreme Court of England and Wales and the founder of Buckworths, the only law firm in the UK working exclusively with start-ups and high growth businesses. Buckworths works across multiple sectors, including Technology, Fin-Tech, Restaurants and Hospitality, Fashion and Fashion-Tech, Bio-Tech and Med-Tech, Blockchain, and more. My passion for entrepreneurialism has led me to advise on the countless of start-ups over the last ten years across multiple industry sectors. For several years, I have been a regular speaker at industry events encouraging entrepreneurs to take the next step in their start-up journey. Recently, I also published my first Amazon Best Seller, Built On Rock - the busy entrepreneur's legal guide to start-up success. Advising on the risks and pitfalls to avoid when setting up your own business, I wrote this book to make the complicated aspects of start-up law simple. Available on Amazon and in all good bookstores.

You might also like…

Get business support right to your inbox

Subscribe to our newsletter to receive business tips, learn about new funding programmes, join upcoming events, take e-learning courses, and more.