First comes the obvious question of “Do I need insurance at all for my business?”
What is business insurance? Insurance helps to cover you and your business against unforeseen events which incur either financial loss or physical damage.
Therefore, the answer is a definite yes – you should have it and you must if you’re an employer!
This is because the financial impact of being uninsured could put you out of business or in some cases the law requires you to have insurance.
Before we start, if you are not comfortable about the subject of insurance then you should take professional advice from a broker.
How will insurance work for my business?
There are several different insurance policies to help protect you from the financial impact of an insured event. Its is worth taking advice about the types of policies you might need in your business but we can help – read on!
Fortunately, today many insurers have designed policies with you in mind and basic policies are relatively cheap and effective. However, you must be careful not to over (or under-)-insure so read the ‘small print’ to make sure that the risks you may face are adequately covered.
As a starting point we suggest that you make your own assessment of what your insurance needs using a risk management approach – this is one where you answer the following statements about your business:
This ….. event will have a negative impact on my business (the risk), it is quite/very common (likelihood of happening) and would have a significant impact (impact). I can best reduce the impact by having insurance (using a financial measure) or wearing gloves etc (taking physical measures).
Bear in mind some events though likely have no real impact and are not worth insuring on their own, while others would put you in financial trouble.
Some examples might be:
Tools broken – financial impact to replace
Van stolen – financial impact
Leg broken – physical protection but financial impact if you can’t work.
As with all things, it’s worth a short pause to plan what is required – hence we cover this in the business planning courses. A simple plan to get an overview of what you might need would be:
- List your business activities
- Get a sense of the likely size of jobs you are going to accept (what value)
- What equipment you will need and how much that will cost to replace
- How many employees you will need, if any, in the next 12 months
- What sort of transport do you need?
- Do have business premises? and how much should they be insured for,
Then you can decide what and how much insurance you must have and how much you would want ideally.
What are the key types of insurance that you must or ought to have?
Public & Product Liability
This insurance will protect you from claims by customers for loss arising our out of your mistakes (negligence) at work. It is different to Professional Liability covers because Public Liability policies are geared to the fact that the work done by “trades” is usually tangible (a new roof or new boiler installed). Remember disputes can often include legal expenses and even court, policies will often have cover for those costs either in addition to the limit of included in the overall limit – but check the small print. You will need to consider therefore the following:
- Is the cover right for my business?
- Is the limit of cover enough for the likely risks I am running?
- Are there any special requirement imposed by the insurer?
- Do any of the exclusions impact the usefulness of my policy
- How much deductible am I prepared to carry for each claim against me?
Tools (property) and Equipment Cover
If you are in skilled trades, tools and equipment cover can protect you from the loss or theft of the key items of your trade. Some cover is often offered with a Products & Public Liability policy but it can be bought as a separate policy. Be careful to read the exclusions on cover e.g. where your tools need to be kept or stored overnight.
Employers Liability
Under law every employer must have a valid Employers Liability policy even if you only have one employee. The cover is rather like Public Liability cover and protects you from the financial impact if an employee makes a claim for an injury or falls ill whilst at work for you.
As with Public Liability claims these losses can be expensive and include legal costs. Bear in mind if you don’t have a policy you will be subject to heavy fines. Currently these fines run at £2,500 per day you don’t have a policy in force!
Private Medical Insurance
If you are injured and cannot work, then your business and income is likely to suffer. Perhaps you can’t afford to wait for NHS appointments and treatment. You may therefore need to look at buying protection. It is however important you understand the cover you are buying.
Personal Accident or Sickness insurance
This is different to Private Medical Insurance. This is a form of income support and will pay out an agreed sum on a periodic basis after a ‘waiting period’ for up to a fixed number of weeks or months.
Buildings and contents Insurance
You will probably already have a buildings and contents insurance for your home. It is usually necessary to have a separate policy for your business. Some home insurance policies may allow for some extension to cover some office use in your home but your business stock and equipment will not be covered.
When choosing your policy, you need to think carefully about the following issues:
- Does the policy cover the premises and equipment I need and use?
- Will it cover any stock I have?
- Are there special conditions applied for eg flammable or valuable items?
- Is the limit and deductible right for me for this year?
- Does the cover extend to my support office equipment?
Special Note: Home insurance – for business
When starting, you may want to use your home as a base or an office. So carefully check your home insurance, it may be possible to extend your cover to allow certain commercial and business activities.
Commercial Vehicle Insurance
If you are going to use your vehicle for commercial purposes (apart from driving to and from work and clients) then you will need to have special insurance for you and your employees when using it.
Professional Indemnity Insurance
This protects you or your company against legal claims for negligence and the losses you will have caused due to a breach in a code of professional conduct. Historically the professions were people like accountants and lawyers today the scope includes brokers and for example Mortgage or pension advisors. If you are thinking of entering these professions, you will be required as part of your qualification to practice to have a minimum level of Professional Liability insurance. For “trade” professionals the usual cover to have is Public Liability.
Legal Insurance
A cover which protects you with financial support if you need to take legal action against a supplier of someone who steals your intellectual property. It also provides you with legal fees to defend your, or your business, against a claim under public or product liability or professional indemnity. It is usually offered as an add-on to a policy, just like your private motor insurance, or included within the policy.
Cyber Insurance
If your business has a website and you are doing business online (that includes taking customer details, making sales or just accepting their payments etc) then your business could be hit by criminals or just malicious hackers. Cyber cover is available to protect you from the most common types of attacks. They are not very expensive but again, review what you need, the impact of losing your site and balance it against the cost.
Directors and Officers (D&O) insurance
This is specialist insurance and only for limited companies where there is a board of directors and ‘executive officers’. It protects the directors against legal actions brought by shareholders. Take specialist advice.
Key person Insurance
For some businesses, very specialist skills or very important individuals could merit being insured against illness or death. Besides being a tragedy this might cause your business financial loss. There are specialist markets for this type of insurance. It is not a common feature for most start-up businesses.
Now we know what the types of insurance are, let’s go back to the beginning and answer what I need and how much is it going to cost?
Again, it’s worth a short pause to plan what is required – hence we covered this above and we do so again in the business planning courses.
Then you can decide what and how much insurance you must have and how much you would want ideally.
It is worth speaking to someone about insurance cover, don’t be concerned about calling a specialist firm of brokers as they are there to offer advice and are used to handling customers who are ‘shopping around’.
Once you have a sense of what you need, we may be able to help you – click on the left-hand panel for information about our products and a no-obligation quote.
Top Tip: If you already have an insurance policy then look and compare quotes every year – there may be benefits for loyalty (eg No Claims Discounts) but it never does any harm to check. Remember you make your own luck!
