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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.

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Why do I need business insurance?
When choosing your cover, consider the key threats to your firm’s operation.

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. 

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 typeWhy you might need it
Employers’ liability insuranceYou must have this type of cover if you have employees
Commercial motor insuranceYou need this if your business uses any vehicles
Professional indemnity insuranceThis is a regulatory requirement in some professions, such as law and accountancy
Public liability insuranceSome 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 typeWhat it does
Commercial property insuranceProtects your buildings
Public liability insuranceProtects injured clients or damaged client property
Product liability insuranceCompensates 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 insuranceCovers the cost of compensation claims against your company’s directors and key managers
Cyber insuranceCovers losses relating to IT systems, networks and data
Personal accident insuranceCompensation if an employee is killed or permanently injured in an accident
Business equipment and office contents insuranceCovers things like computers, equipment, tools and stock
Business interruption insuranceCovers you against lost sales and profits if you’re unable to operate due to an incident
Equipment breakdown insuranceHelps with costs if you suffer sudden mechanical or electrical failure in key pieces of equipment
Key man insuranceInsures employees that are critical to the running of your day-to-day business
Credit risk insuranceProtects 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 £2,500 per day for each day that you don’t have the right employers’ liability insurance. 

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.

Get a business insurance quote

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