Business Insurance – Insurances your business must have

Just like driving a car, you are required to have certain insurances to run your business (third party fire and theft), and it’s advisable to have others (fully comprehensive).

There are hundreds of different types of insurances available for business. Here’s a look at the main compulsory insurances that businesses 'must have', some insurance cover you 'should have', and several ‘could have’ policies that will add protection to your business.

Business insurance policies you must have

Employer’s liability insurance

Once you take on your first employee, you are required by law to take out employer’s liability insurance. This will protect your employees if they fall ill or are injured in the course of their work. Your insurance certificate must be displayed where your staff can see it.

You don’t need employer’s liability insurance if your limited company has one employee, who owns 50% or more of the share capital (i.e. you). Read our overview of employer's liability insurance for more information.

If you are a sole trader and do not employ anyone (or you only employ close family members), you should also be exempt. However, if you occasionally hire staff or use temps or seasonal workers, you must take out insurance.

Premises insurance

If you rent or own premises, you must protect them, just as you do your home. That means contents insurance and a buildings policy if you are the owner. This will protect your business in the event of a fire, flood, burglary or some other catastrophe.

It’s also worth looking at business continuity in policies… if you lose your premises and entire stock in a fire, will your policy pay out a sum quickly to help your business get back on its feet? Remember to check what levels of stock are covered in your policy.

Motor vehicle insurance

If you operate company vehicles, you must have at least third party insurance, and preferably fully comprehensive. Remember employees are less likely to look after their company vehicle, so you may find yourself claiming on your policy more often than you would expect to with a private car.

Industry-specific insurance policies

Solicitors are required to carry an insurance policy in order to practice law. If you are part of a recognised profession, check with your industry body what insurance policies they insist, or recommend you hold.

Business insurance policies you should have

Public liability insurance

Public liability insurance is essential if members of the public come to your premises, or could be hurt in any way by something your business does. A public liability insurance policy will cover you for any damages claimed, plus legal representation. You'll find more details in our overview of public liability insurance.

Product liability cover

If you make, repair or sell products, you could be held liable for any injury or damage caused by defects.

Professional Indemnity (PI) insurance

Professional indemnity or PI insurance gives professional businesses protection against claims made by their clients, for any damage caused by professional negligence. It is advisable to have professional indemnity insurance if you offer any kind of service to businesses or the public. You'll find more detailed information in this guide to professional indemnity insurance.

Pollution risk insurance

If you manufacture anything and there’s any risk you might pollute the environment, this will cover the costs of any clean up operation, plus claims against your business.

And a selection of more specific business insurance policies you could buy

Director’s & Officers insurance
Director’s & Officers insurance, or D&O insucrance as it's commonly known, covers the legal liabilities you have as a director of a limited company and any legal costs if you get something wrong.

Key person insurance
If your business would grind to a halt if you or someone else was badly injured or killed, key person insurance will protect the business against loss of revenue while a replacement is found.

Business continuity insurance
Also called business interruption insurance, this will protect you against any disruption that could lead to loss of revenue, such as a major catastrophe. You should aim to cover events not already covered by your contents insurance, or where there will be a longer-term disruption (such as total loss of premises).

Fidelity guarantee
Protects your business against loss of money or stock if one of your employees is dishonest. Unlikely to be cost effective until you have a significant number of employees.

Glass & sign cover
If you have a shop with a large window or expensive signage, it may not be covered by other policies if it’s destroyed by vandals.

Plant and business equipment cover
If you rely on key expensive machinery, get it insured in case it’s damaged or stolen.

Goods in transit cover
If you shift large amounts of stock around, this will give you extra protection from accidents or theft.

Money insurance
If you hold large amounts of cash or other valuable documents, this may offer you some protection against loss or theft.

Trade credit insurance
Will pay out if you have a bad debt. Definitely worth looking at if you sell a small number of high value items.

Engineering insurance
Provides cover against electrical or mechanical breakdown of essential equipment.

Employee travel insurance
If you require your employees to travel abroad, you should get them well insured with a reputable company that will look after them in an emergency. Remember to check their luggage, money and any laptop will be covered.

Remember to get professional advice from a qualified person before taking any action. Don’t rely purely on information contained in this article.