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- Why Is Business Insurance So Important For Your Business?
Why is business insurance so important for your business?
Having the right insurance helps protect your business, employees, clients and customers. It can help mitigate risks such as lost stock, injuries or illness, unexpected legal costs and even natural catastrophes. Some types of insurance are a legal requirement, while others are optional, but they can all help keep your business up and running if things go wrong.
What is business insurance?
Business insurance is a broad term covering several different financial products designed to help protect your company against risk. As with any insurance product, you pay a monthly or annual premium. In exchange, the insurance company will provide compensation if certain events occur. For instance, if you have property insurance for your shop, you should be protected if the building catches fire.Â
Do I need business insurance?
Some types of insurance are required by law, while others are voluntary. These optional types can often be a good idea depending on the type of business you run and the risks you face. Having the right kinds of insurance can boost your business resilience and buy you peace of mind.
Even if you are not required to have certain types of insurance by law, some clients might insist you have them before doing business with you. Having this insurance shows you're professional and can help you get new contracts.
Legally required cover
| Insurance type | Why you might need it |
|---|---|
| Employers’ liability insurance | You must have this type of cover if you have employees |
| Commercial motor insurance | You need this if your business uses any vehicles |
| Professional indemnity insurance | This is a regulatory requirement in some professions, such as law and accountancy |
| Public liability insurance | Some organisations may insist you have this in place before they will sign a contract with you. It is often a requirement for working with local authorities or governments, for instance |
Optional cover
| Insurance type | What it does |
|---|---|
| Commercial property insurance | Protects your buildings |
| Public liability insurance | Protects injured clients or damaged client property |
| Product liability insurance | Compensates people who suffer damage or injury due to your products. You don’t have to be the manufacturer to be liable |
| Directors’ and officers’ liability insurance | Covers the cost of compensation claims against your company’s directors and key managers |
| Cyber insurance | Covers losses relating to IT systems, networks and data |
| Personal accident insurance | Compensation if an employee is killed or permanently injured in an accident |
| Business equipment and office contents insurance | Covers things like computers, equipment, tools and stock |
| Business interruption insurance | Covers you against lost sales and profits if you’re unable to operate due to an incident |
| Equipment breakdown insurance | Helps with costs if you suffer sudden mechanical or electrical failure in key pieces of equipment |
| Key man insurance | Insures employees that are critical to the running of your day-to-day business |
| Credit risk insurance | Protects against the risk of non-paying customers or clients |
Find out which types of insurance businesses most often overlook
Working from home
You might need to think about your home insurance if you regularly work from home. This is particularly important if you keep stock or expensive equipment in the house or see customers at home. If you’re running the business entirely from home, you may need to consider commercial property insurance.
What happens if a business doesn’t have insurance?
If insurance is a legal requirement and you fail to put it in place, you will be breaking the law and could be punished accordingly. For instance, you can be fined up to ÂŁ2,500 per day for each day that you don’t have the right employers’ liability insurance.Â
If public liability insurance is a contractual agreement, you will likely be in breach of contract if it expires.
In the case of voluntary insurance products, the consequences of not having them are that you have to bear the costs when the unexpected happens. For instance, if criminals steal your stock, your business would have to pay to replace it. You also wouldn’t be covered for unexpected legal fees, and there would be no compensation if you had to stop trading for a period due to an incident.
How much cover do I need?
The types of insurance and levels of cover you need will depend on your industry and company size. For instance, an accountancy firm may face very different risks to a construction company and consequently needs a different mix of insurance products.
When choosing your cover, consider the key threats to your firm’s operation. Important factors include:
Your annual turnover
Whether you deal with the public
If you go into people’s homes
Whether you have expensive equipment
If you have employees
The location and size of any business premises
Whether you hold customer data
How to buy business insurance
Many insurance companies offer bundled business insurance packages designed for small businesses and start-ups. You can often tailor these to your organisation, so you only pay for the cover you need. Doing it this way can be cheaper than getting lots of standalone policies.
Use a comparison site to see how much you might pay with different providers. You might also want to work with a broker who can help you consider all the risks and find the right policy for you.
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