What insurance does a small business need?

What is business insurance?

Business insurance is a catch-all term covering a variety of distinct policies, each protecting against specific losses, such as libel, theft or personal injury claims.

Also known as company insurance, this form of cover exists because different firms, from solicitors to window cleaners, face different risks. For example, a solicitor could get into hot water if a client believes they’ve received negligent legal advice. 

A window cleaner wouldn’t face this kind of problem. But then again, the solicitor’s unlikely to suffer workplace injuries caused by falling off a ladder. What they have in common is that you can cover both with the right kind of business insurance.

Why would I need business insurance?

If you can identify possible work-related hazards, the chances are there’s a policy that would offer the right level of protection. One way to tell whether you’d benefit from having a business insurance policy is to ask yourself whether you (or your staff): 

• Come into contact with the public, customers or clients through work

• Offer advice

• Sell products or services to third parties

• Conduct business or store information about your staff and customers online

• Have potential clients who won’t work with you without a specific policy

• Have people working for you

• Work from home

• Have expensive, specialised equipment or tools

If the answer to any of the above is yes, you may want to consider getting cover. For example, if your job brings you into contact with other people, taking out public liability insurance may be worthwhile. This cover could shield you from problems such as someone injuring themselves by tripping over your doorstep or ruining their clothes by touching railings you’ve just painted. 

Note: A small business is arguably no less likely to be sued than a big company. In fact, a claimant may conclude they’ve more chance of winning a case or settling out of court against a small company.

What types of business insurance are available?

There’s a huge range of business insurances, each designed to protect against specific potential losses. What cover your business needs depends entirely on the risks you face. 

Here are some of the main types of commercial and business insurance:

Employers’ liability insurance

• Employers’ liability insurance covers you against compensation claims made by staff who suffer injury, illness or loss because of their work.

• This cover is a legal requirement if you have anyone working for you for any length of time. The only exception is immediate family members.

Public liability insurance

• Public liability insurance protects you against claims for loss, damage or injury made by anyone who doesn’t work for you, including customers and members of the public. 

• It’s a legal requirement if you run a horse-riding business.

Professional indemnity insurance

• Professional indemnity insurance covers claims against you for losses caused by poor advice, loss of intellectual property or libel. Surveyors, journalists and solicitors are among those who should consider this cover.

• Some companies will only work with firms that have professional indemnity insurance. Without it, you could miss out on lucrative contracts.

Buildings and contents insurance

• Business buildings and contents insurance covers your workspace, equipment and tools, whether you work from home or at separate premises. 

• It’s worth noting that home insurance policies can exclude damage to home offices and work equipment, including computers and tools.

Stock insurance

• Stock insurance covers any stock you keep at your business, whether in a shop, at home or in an office.

Personal accident insurance

• Certain small businesses, such as scaffolders and fishermen, work in potentially dangerous environments. This insurance can cover medical costs and loss of income following serious injury.

Goods in transit insurance

• Goods in transit insurance protects you against claims arising from loss, damage or theft of client or customer property during transport. 

Business interruption insurance

• Business interruption insurance can make all the difference if you can’t work due to events beyond your control – for example, a roofer who can’t work due to storms or high winds. 

Cyber insurance

• Data breaches, cyberattacks and online fraud can cripple a business, yet other policies often exclude losses caused by cyber-crime. As a result, firms that conduct business online or keep employees and client details digitally should consider cyber insurance.

What insurance does a growing business need?

The types of insurance you need can change over time. For example, you may start as a sole trader, running your business with nothing but a van and a mobile phone. But if your business thrives and you take on staff, you’ll need employers’ liability insurance (unless all your employees are close family). 

You may also upgrade your work equipment as your business blossoms, perhaps relying more on digital transactions. In this case, you may want to consider cyber liability insurance, so you’re protected if criminals hack your computer or steal client data. You might also want to consider business premises insurance if you start working out of a home or remote office. 

The possibilities are endless, so regularly review what risks you face and which policies could help should something unfortunate happen. 

How can I get small business insurance?

Once you know what business insurance you need, it’s worth looking at a comparison site to get a good idea of what business insurance policies are available and the different levels of cover on offer. 

You can buy policies individually or as a bundle  –  for example, business buildings, contents and stock insurance. Insurers also group together some policies to suit certain types of businesses. For instance, you could buy:

• Self-employed business insurance – for sole traders, contractors and freelancers

• Tradesman insurance – available in a variety of guises, including dog-walking insurance and builders’ insurance 

• Limited company insurance – helps keep insurance costs down for limited companies by giving them just the level of protection they need 

How much does business insurance cost?

Buying business insurance might not be at the top of your to-do list despite its importance to your firm's security. But the good news is that it might not be as expensive as you think.   

According to recent research, public liability Insurance typically costs from £50 to £500 a year, while employers’ liability insurance usually costs from £60 to £200. 

The difference in costs reflects the varying levels of risk associated with companies operating in particular markets or locations and the consequent payouts involved when they make a claim on their business insurance. Other factors that affect the price include cover limits, turnover and number of employees.