What is business insurance?
It provides financial protection for businesses, including public liability insurance and cover for equipment and stock.
Business insurance is designed for sole traders and self employed professionals, as well as larger companies with employees. Whatever its size, it is important to get the right protection for your business.
Do you need it?
If you work for yourself, you need business insurance to give you the same protection you would have if you were employed. This also applies if you work from home.
If your business was sued, it could cost you millions or leave you bankrupt. You may also have tools or equipment that would be expensive to replace if they were lost or stolen.
What cover you need depends on:
The type of business you run
What you need to protect, e.g. tools, stock or contents
How many people you employ
No, you cannot get insurance that pays out if you go bankrupt.
However, getting the right business insurance in place could minimise the risk of bankruptcy by giving you financial protection against common risks. For example, public liability protects you against negligence claims.
What cover can you get?
You can tailor policies to include the cover your business needs. You can include all these types of insurance under one policy, or buy them separately if you need specialist cover:
Public liability insurance covers your legal costs if a third party is injured or dies, or their property is damaged, as a result of your business activities.
It covers you while you are out in public, and if you have clients visiting your business premises.
You can usually choose cover limits between £1 million and £5 million, and you should pick a limit that reflects the work you do. For example, a builder is more likely to cause injury or property damage than a photographer.
If you are unsure what limit of liability your business needs, speak to an insurance broker who can advise you.
It provides cover if your staff are injured or die while they are doing work for your business, and you are found to be negligent.
You are legally required to have £5 million of employers' liability cover if you have staff working for you. This includes volunteers, apprentices and people on work experience.
You must keep your employers' liability certificate on display at your business premises, for example in the staff room.
As an employer, you have a duty of care to your employees. This means you must keep them safe while they are at work by giving them correct training, proper tools, and safety equipment.
If you breach this duty of care, you may be negligent and your employees could sue.
If you run a business that offers advice to customers for a fee, you will need professional indemnity insurance.
It covers the cost of damages if a client has lost money after following your advice. It also covers mistakes, copyright infringement and negligence.
The type of businesses that usually need professional indemnity cover include:
If you are unsure if you need professional indemnity insurance, speak to an insurance broker who will be able to advise you if it is something your business needs.
If you are a tradesman, this can provide cover for your work tools and equipment if they are:
You can also insure your tools if they are left in a vehicle overnight, but you may need to pay extra for this.
This covers your business premises and its contents for:
Personal property, e.g. employees' or visitors'
You should think about getting commercial property insurance if you own or lease a business premises, like a shop or office.
If you own your business premises, you will need to insure the building and its contents
If you lease your business premises, you will only need to insure the contents
Commercial vehicle insurance
If you use cars, vans or other vehicles in connection with your business, you are legally required to have at least third party motor insurance.
You need to have at least £1 million property damage and unlimited cover for personal injury, but you can also choose:
Third party, fire and theft: This covers you if a third party is injured, or their property is damaged, because of a car accident involving you or an employee. It also covers vehicles damaged by fire, or stolen.
Fully comprehensive: This includes the same cover as third party, fire and theft, plus accidental damage. It also covers personal belongings, and goods or tools carried in connection with your business.
If your vehicles are used regularly, or they are driven by employees, you may want to consider fully comprehensive cover.
This is insurance for builders and tradesman, that covers any work you have started on a site. It pays to repair or replace the work if it is damaged by:
Cover includes labour costs, materials and tools to get the work back to the position it was in before the damage took place. Check with your client to see if you are responsible for unfinished work.
This covers any loss of profits due to insured property damage at your place of work. For example, if you are unable to open your shop because it has been flooded.
It also covers any outgoings you need to continue paying if your business cannot trade. For example, rental payments on a business premises.
Check your most recent accounts, so you can tell your insurer the level of cover you need to protect your income.
Cyber risk insurance can pay out if your business experiences a data breach or is hacked, and your computer systems are affected.
You may need cover if you:
Hold sensitive customer data, e.g. addresses and banking information
Rely on your IT system to run your business
Run a website
Most business insurance policies include the option to add cyber cover, but speak to a broker if you need advice on whether your business needs it.
Key person insurance
This covers financial loss caused by the death or critical illness of a key figure in your business, for example a business partner or director.
It works like life insurance, paying a lump sum to you if a named key person dies or is terminally ill during their time in your employment.
How much does it cost?
The price of your business insurance will depend on:
The type of business you run
Your annual turnover
How many people you employ
The size of your premises, if you have one
How much cover you need
Compare as many different policies as possible, to make sure you get the cover you need at a competitive price. You could also speak to a broker if you need advice on finding the right insurance.
What else do you need?
If you are self employed, you should look into personal insurance, because you will not receive the same benefits as someone who is employed. Look for:
Income protection: This will provide you with an income if you are unable to work due to illness or injury.
Life insurance: This will pay out a lump sum to your next of kin if you die. It can cover financial commitments, like your mortgage.
Critical illness cover: This will pay you an income if you are unable to work because you have a terminal illness.
Private medical insurance: This could provide you with private healthcare for short term illnesses or injuries.
Private pension: This can replace the workplace pension you would get if you were employed.