Posted: Tue 9th Jun 2015
You're investing time and money in your business, so protecting its future is one of your top priorities. But for many small or young businesses, it's not always clear what sort of insurance you really need.
We asked the small business insurance experts at Direct Line for Business for answers to some of your most popular questions on business insurance. Here's what they said:
1. Why do I need insurance?
No matter how carefully you run your business, sometimes things pop up that just aren't within your control. A faulty product from one of your suppliers, an accident on your premises, or even the theft of your assets can all leave you with an unexpected bill. So having the right cover in place can help you make sure that bill gets paid.
Remember, even if you're convinced that 'it'll never happen', some types of insurance are required by law; employers' liability, for example.
What's more, there are lots of large clients out there who'll expect to see proof of insurance before they consider working with you.
2. What type of insurance do I need?
It really depends on the nature of your business: i.e. what it is you sell or provide and how your business is linked to the public. A freelance graphic designer working at home may still need public liability cover if clients visit their home office, and any retailer should seriously consider some level of product liability insurance.
3. Will home insurance cover me for my home-based business too?
Many home-based business owners make the mistake of thinking that their home insurance policy will cover all of their business activities. But the truth is, running a business from home without first making arrangements with your insurance provider could potentially invalidate your home insurance policy.
It's not just a case of covering your stock and equipment. Accidents can happen when clients or delivery workers visit your home. And without proper business insurance, your business could be seriously impacted if you end up facing a lawsuit.
4. What is the difference between public liability, product liability and professional indemnity?
Essentially, public liability insurance helps cover you against claims for injury or damage to a person [a third party, not an employee] or their property, whether it happens on your premises or elsewhere.
Product liability deals with the goods you supply and their level of safety. This isn't just a concern for manufacturers. A retailer selling faulty products that came from a third-party supplier could still be held responsible, so don't think you can avoid claims if you're a middle man.
Finally, professional indemnity insurance covers less tangible damages to your clients and the public, such as financial or reputational damage. If your business handles sensitive data or gives any kind of professional advice, you'll need to be sure you're protected against any accusations of negligence or incompetence.
5. If I'm running an event for clients or displaying products at a trade show, what insurance do I need?
At the very least, you'll need public liability cover. You're exposing your business to members of the public and anything that happens at your event is at least partly your responsibility.
If you're intending to sell any products, or even give away samples, you might also need product liability insurance, in case your goods cause any damage or harm.
Lastly, unless you're hosting the event entirely by yourself, you'll probably need employer's liability cover. If you're planning to use existing employees to help with the event, you should already have it. It's a legal requirement if you have employees.
6. If I employ freelancers to work on contracts, who is the party that should be insured?
In the end, the safest bet is probably to make sure both sides are adequately insured: both you and your contractor.
7. How much can I expect to pay?
As you might expect, it all boils down to what your business does, how close it is to the public and what your specific needs are.
The most important thing is to find a package that gives you enough cover without making you pay for extras you don't need. However, if you do need employers' liability insurance, remember that the law requires you to use an authorised insurer.
That's why it's a good idea to go with an experienced and reputable provider that can give you the right advice for your specific business.
Get your home business questions answered in the Direct Line for Business and Enterprise Nation Twitter chat on 10 June at 11am. Simply tweet your question to @DL4Bnews using the hashtag #HomeBiz.