Business insurance provides both professional and financial support if you face a claim against you. It’s often considered necessary by businesses as the cost of a claim could run into the thousands of pounds, in terms of both legal fees and compensation costs, and many business owners would be unable to afford these costs without insurance.
Depending on the type of work you do, your business insurance requirements will vary.
There are three key things to think about when considering what covers you need for your business.
Firstly, meeting legal requirements. If your business hires employees you’ll need employers’ liability insurance as this is a legal requirement. Not being covered may result in a fine of up to £2,500 for each day you didn’t have it.
Secondly, what risks do you face as a business?
If your business involves in-person interaction with clients or even spending time working in areas where non-employees are present, you’ll want to think about public liability insurance.
If you work contracts or offer advice, professional indemnity insurance.
If you have lots of expensive or difficult to replace contents, business contents insurance is a cover to consider.
And if you handle customer data, run a website, and/or work from computer systems (as most businesses do), you’ll want to think about cyber insurance.
Thirdly, if you’re operating a limited company, do your business officers and directors require cover? It’s sometimes assumed that they’re covered by your general business covers, but claims made personally against them are not. This is where D&O insurance, also known as management liability insurance, comes in.
Business insurance is an umbrella term that comprises a number of different covers you can choose from to provide protection for the different business risks. These covers include:
One of the most common covers selected by businesses, public liability insurance may cover legal and compensation costs in the event that a member of the public (anyone who isn’t your employee) takes action against you for injury or damage to their property. It’s key to remember that even if your work doesn’t involve much face-to-face time with clients, if you’re working in public at all - or have the occasional client on site - you do face risks that public liability insurance covers.
Although it’s not a legal requirement, it’s often required by clients or even your office space, if you’re renting.
All businesses with employees in the UK, whether temporary, part-time or full-time, should have at least £5 million employers’ liability insurance, as it’s a legal requirement.
Employers’ liability insurance works in much the same way as public liability insurance, but it covers you for injury or damage relating to your employees.
Note that the definition of ‘employee’ in this context is fairly broad, so it may be best to err on the side of caution, given that not having employers’ liability insurance can lead to a fine of up to £2,500 for each day you don’t have it - not to mention uninsured claims against you.
You can find out more about employers’ liability insurance in Health and Safety Executive’s guide for employers.
Business contents insurance is just that - cover for your business contents. It applies in the event that your business contents are damaged or disappear due to: fire, flooding, malicious damage, storm damage or theft. In the event of a successful claim, you’ll either be covered for the cost of repairs, or replacement.
As with home contents insurance, it’s common to think you don’t have much to insure, but once you start taking an inventory of your business contents, you’ll probably find that there’s more at risk than expected! Don’t forget to include equipment - such as computers, laptops and phones, plus more technical machinery, documents and even cash. Although it’s not a legal requirement, contents cover could mean the difference between being able to back up and running quickly, or not at all.
Professional indemnity insurance provides cover for professional services or contracts provided by your business. So whether you’re a consultant, or simply offering some advice to a client as your work on a job, it’s there to offer protection for legal and compensation costs in the event that you’re sued for providing advice or services that led to financial loss. Professional indemnity insurance isn’t a legal requirement, but you may find that clients require you to have it - and that even if they don’t, not having it is a risk too big to take on.
A much-needed but often neglected cover, cyber insurance is relevant for most businesses today. With reliance on computer systems, websites and data comes a plethora of associated risks. From ransomware attacks to accidental privacy breaches, the cost to your business, both in the short and longer term, can be devastating.
Cyber insurance provides specialist technical, financial and communications support in the event of a cyber breach, plus compensation costs in the event of a regulatory breach.
Directors and officers’ insurance, also known as management liability insurance is designed to cover claims made personally against company directors and officers. It’s sometimes incorrectly assumed that these risks are covered by professional indemnity insurance or general liability insurance, but they’re not.
D&O insurance covers directors personally for fines, penalties and legal expenses and also protects your company if it has to pay on behalf of directors, or if it’s named in the lawsuit. And if you’re looking for funding, investors will typically require you to have this cover.
Public liability insurance is not a legal requirement. However, you may find that it’s crucial for two key reasons:
You would be unable to afford the cost of a claim against you.
Some clients or contracts may insist that you have public liability insurance.
The cost of business insurance can vary widely. The cost of your cover is calculated based on risk. Broadly speaking, the higher the risk, the higher the cost to cover. This makes sense, as your claim will likely cost the insurer more.
Nevertheless, costs between insurance providers can vary too, so it’s worth comparing what’s on offer - but remember to pay attention to the cover itself and reviews about the service, rather than focusing purely on price.
Apart from employers’ liability - which is a legal requirement if you have any employees - and any contractual requirements you may have, this is really up to you.
It can help to think about things in terms of the risks you face and how much you’d be able to pay in legal and compensation costs if you didn’t have insurance to help.
In order to get a quote for business insurance, you’ll need to share your business type (sole trader, partnership, limited company), your registered company or partnership name (this doesn’t apply to sole traders), the industry you operate in, your estimated turnover for the next 12 months, number of employees (if any), and a few details (to save your quote for 30 days).