With so many different types of insurance cover available for small business owners, here is Bytestart’s review of the main insurances that businesses ‘must have’, some insurance cover you ‘should have’, and several ‘could have’ policies.
There is some overlap – for example, PI insurance may not be a legal requirement, but it might be a contractual requirement.
Business insurance policies you are legally required to have
Employers’ liability insurance
Once you take on your first employee, you are required by law to take out employers’ liability insurance.
This type of policy protects 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.
However, although it is mandatory for most companies, there are some notable exceptions:
You don’t need employer’s liability insurance if your limited company has just one employee, who owns 50% or more of the share capital (i.e. you).
If you are a sole trader and do not employ anyone, or you only employ close family members, you should also be exempt.
Even if you don’t have any full-time employees, and just occasionally hire staff or use temps or seasonal workers, you must take out cover.
You can be fined up to £2,500 per day if your business doesn’t have a suitable employers’ liability policy.
The size of the potential fine dwarfs the cost of cover so it’s not something you should delay.
If you own business premises, protecting them is as important as insuring your home. At a minimum, you need a business buildings insurance policy to cover damage to the premises to protect them against fires, floods, or other disasters.
While not required by law, it also makes sense to insure fixtures, fittings, and any business stock kept on site. Most commercial property policies allow you to add coverage for these as optional extras alongside basic buildings 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
If you are part of a recognised profession, check with your industry body what type of cover you need to have in place. For example, solicitors are required – by law – to carry professional indemnity cover.
Business insurance policies you should have
Public liability insurance
Public liability insurance is not required by law, but if members of the public come to your premises, or could be hurt in any way by something your business does it’s probably a good idea to have a robust policy in place.
Depending on the type of business you are in, you might find that some organisations require you to have public liability cover before giving you a contract or allowing you to operate on their premises.
For example, if you have a stand at a market, or attend a fair to sell your wares, the organisers may demand you have public liability insurance before they will allow you to attend.
Professional indemnity, or PI insurance, gives professional businesses protection against claims made by their clients, for any damage caused by professional negligence.
You may find that this type of cover is a legal ‘must have’, particularly if you’re providing personal services to larger organisations.
The terms of your contract with a third party may obligate you to take out professional indemnity insurance. The amount of cover may also be specified (e.g. £500,000, £1m, etc.)
Even if you’re not required to have it by your clients, it is advisable to have professional indemnity insurance if you offer any kind of service to businesses or the public.
You can get an instant PI quote from our insurance partner, Qdos.
Director’s & Officers insurance
Director’s & Officers insurance covers the legal liabilities you have as a director of a limited company and any legal costs if you get something wrong. This type of cover is also frequently referred to as D&O insurance.
Employee travel insurance
If you require your employees to travel abroad, you should get them 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.
Product liability cover
If you make, repair or sell products, you could be held liable for any injury or damage caused by defects.
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
Intellectual Property (IP) Insurance
Much of the value of many modern businesses is made up of intangible assets such as Intellectual Property.
If your business is innovative and relies on patents, trademarks or designs, you might want to consider protecting yourself with Intellectual Property insurance.
Key person insurance
If your business would grind to a halt if you, or another employee, was badly injured or killed, key person insurance will protect the business against loss of revenue while a replacement is found.
Tax investigation cover
This type of insurance will protect your business if HMRC investigates your tax affairs. You can protect the costs of professional representation and even cover any additional tax and penalties that are levied if you lose a case.
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 included in your other insurance policies, or where there will be a longer-term disruption (such as total loss of premises).
Trade credit insurance
Will pay out if you have a bad debt. Worth looking at if you sell a small number of high-value items.
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 insurance
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.
Fidelity guarantee
This cover protects your business against loss of money or stock if one of your employees is dishonest. It’s unlikely to be cost-effective until you have a significant number of employees.
Engineering insurance
Provides cover against electrical or mechanical breakdown of essential equipment.
Cyber insurance
A relatively new entrant to the insurance market, cyber cover will protect your business if your IT systems are compromised by a wide variety of potential threats, such as hackers.
It’s always a good idea to get several quotes. Many insurance websites will give you a quote if you provide some basic details about your business, with no commitment required.
And bear in mind that the cheapest quote may not be the best policy.
For a business insurance quote from our trusted supplier, try Qdos. 100s of Bytestart visitors have taken out a Qdos business insurance policy over the past 15+ years.
