I'm starting a business: What insurance do I need?
Posted: Fri 2nd Apr 2021
Making sure your business is adequately covered is crucial. But it's equally important that the cover you're taking out is right for you.
In this blog, we look at some of the essential business insurance products, and the types of business they're suited to, so you can make an informed decision when arranging cover.
Define your business
There are a range of business insurance products available, but it's important to bear in mind that not all of these will be relevant to every business. Some types of business will need a certain type of cover, while others won't.
So before you buy any insurance, take the time to think about what your business does, as paying for insurance you don't need is an unnecessary cost.
This will help you to understand what it is exactly that you'll need cover for to get the right insurance for your business needs.
Types of business insurance
Public liability and products insurance
While some business insurance products may not be suitable for you, just about every small business will need public liability insurance.
Public liability insurance provides cover against claims made by members of the public who have suffered injury or damage to property in connection with your business.
For example, if someone injures themselves while visiting your stall at an event such as a craft fair, any compensation awarded as a result could be claimed from your business. Not necessarily the organisation holding the event.
Your business could also be held accountable if your customers suffer injury or damage to their property as the result of a product you sell or supply. So if you make or supply products to your customers, make sure that product liability cover is included in your public liability policy.
Product liability will insure your business against legal costs or compensation awarded to the person making a claim against your company.
Although by law businesses don't need this cover, it's a sensible investment. Having product liability cover could mean the difference between success and failure for your business.
Contents and building insurance
Whether you run your business from home or an office, you need to make sure your business contents are adequately covered.
Computer equipment, stock and materials are all crucial to your business's success and often very expensive to replace if damaged or stolen. So you need to make sure they're covered against loss and damage.
While many new entrepreneurs assume that their business activities will be covered as part of their home insurance policy, it's crucial to note that this isn't always the case.
You'll also need to make sure that your business premises are covered against risks such as:
storms and floods
fire, lightning, explosions or earthquakes
Cover for business contents and buildings will usually come as standard with many home business insurance and landlord insurance policies. However, check that this is the case with the insurer, before you agree to take out the policy.
Professional indemnity insurance
If your business provides professional advice, chances are you'll need professional indemnity insurance.
Also known as professional liability insurance, this covers your business against claims made by clients or customers who feel that the service you've provided has been negligent, or has caused them to lose money or suffer damage to their reputation.
This makes it a crucial product for many businesses – including architects, consultants, estate agents and accountants – where advice and design work play a central role.
Many clients, such as local authorities or large companies, will even ask you to provide proof of professional indemnity insurance before agreeing to work with you. So if you're starting a business in these types of sectors, taking out professional indemnity insurance could be a smart move.
Employers' liability insurance
If you have employees, you'll need to make sure that they're insured. In fact, by law you have a legal duty to insure them.
Employers' liability insurance provides precisely this cover, and will insure your business against claims made by employees who have fallen ill or suffered an injury during the course of their employment with you.
The amount of cover you'll need will depend on a number of factors (such as the number of employees you have) but it's compulsory to have at least £5 million of employers' liability insurance. Many insurers will provide £10 million as standard, but check the policy for the exact figure before you buy.
You'll also need to make sure that your employees know that they're covered. You can do that by displaying your certificate of insurance (which your insurer will provide once you've taken out the policy) in your business premises at all times.
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