A limited company doesn’t need every insurance policy going. The right cover depends largely on the work it does, the people it employs and the risks it takes on. A one-person consultancy has very different needs from a building firm with staff, vehicles and expensive equipment.
It’s worth checking your client contracts before shopping around. Some customers will insist on particular insurance policies and minimum levels of cover, even where there is no legal obligation to buy them.
There’s also a distinction between insuring the company and insuring yourself. A limited company is a separate legal entity, so the name on the policy, the activities it covers and the people insured all matter.
Employers’ liability insurance – when is it compulsory?
If your company employs anyone, employers’ liability insurance is normally required by law. Policies must provide at least £5 million of cover from an authorised insurer, although businesses often arrange more.
There is an important exemption for a company with only one employee who owns at least 50% of its shares. This is why many one-person limited companies don’t need employers’ liability cover. The position changes if you take on staff.
The rules can also catch some casual and temporary working arrangements. Don’t assume that calling someone a freelancer or subcontractor automatically settles their employment status for insurance purposes.
For more detail, see our employers’ liability insurance guide, which covers the underlying rules and exemptions. You can also check the government guidance.
Public liability – useful for more companies than you might think
Public liability insurance deals with certain claims from third parties who are injured, or whose property is damaged, as a result of your business activities.
A customer trips over something in your workshop, for example, or one of your employees damages property while visiting a client. These are the kinds of situations that may lead to a claim.
It’s not a general legal requirement, but landlords, clients and event organisers may insist on it. Tradespeople and businesses that regularly visit other premises should look at it carefully. Our public liability guide explains what it does and doesn’t cover.
Professional indemnity insurance
If you provide advice, consultancy, designs, accountancy, IT services or other professional work, this may be your most important policy.
A client could argue that your mistake caused it financial loss. Even if you dispute the allegation, defending a claim can be expensive. Professional indemnity (PI) insurance can cover eligible defence costs and compensation, subject to the policy terms.
It’s commonly required under consultancy and agency contracts. Regulated professions may have their own compulsory insurance rules.
We have a separate guide to professional indemnity insurance for limited company directors. IT consultants and software professionals should also read our PI insurance guide for IT contractors, which looks at contract limits, retroactive dates and run-off cover.
One detail deserves particular attention: many PI policies operate on a claims-made basis. If you change insurer or close your company, you need to understand whether claims relating to earlier work will still be covered.
What about vehicles, equipment and working from home?
A company vehicle used on public roads needs appropriate motor insurance. If you use your own car for company business, check that your personal policy allows that use rather than assuming ordinary commuting cover is sufficient.
Expensive equipment, stock and tools are another consideration. A laptop may be easy to replace, but the combined cost of several computers, specialist tools or workshop equipment soon adds up. Check whether equipment is covered away from your premises.
Working from home doesn’t automatically mean that your household insurance will cover business equipment, stock or visitors. Our working-from-home insurance guide explains the issues.
Other policies worth knowing about
Cyber insurance can be useful for a company holding customer data or relying heavily on its systems. The cover varies, particularly for ransomware, business interruption and recovery costs. We look at this in our cyber insurance guide.
Business interruption insurance may cover lost income following certain insured events, such as serious damage to business premises. It won’t necessarily cover every reason a company stops trading.
Directors’ and officers’ insurance (D&O) is different again. It can protect directors and officers against certain claims arising from decisions made in running the business. It’s not a substitute for PI or public liability insurance.
If the company uses subcontractors, check how your insurer treats them and whether their own cover is adequate. Our guide to insurance when hiring subcontractors or freelancers covers that point.
How much cover should you buy?
There’s no useful single figure for every limited company. Some contracts specify minimum levels – £1 million of PI or public liability cover, for instance – while other businesses have to make a judgement based on the size of potential claims.
Read the exclusions before buying. Check that the insurer has the company’s correct legal name, understands what it does and covers any overseas work or activities at client premises. Look at the excess and whether the limit applies per claim or across the policy year.
And don’t automatically renew the same package if the business has changed. A company that has taken on staff, moved premises or started offering different services may need different cover from the one it bought on day one.
For a wider look at the available policies, see our small business insurance guide.