Business Insurance for Small Businesses

It’s certainly an important decision, but what insurance does a small business need? Whilst there are several different types of business insurance, Employers Liability cover is a legal requirement. Most importantly, the Health & Safety Executive (HSE)  could fine you up to £2,500 per day for the duration that cover isn’t in place. Whilst this is a must have if you employ staff, it’s a good idea to consider what other types of business insurance cover your startup, small business needs.

Before diving into the main types of insurance cover, please consider the included information in conjunction with your own thorough research. For example, once you’ve identified the different types of insurance cover for your small business, check out at least 3 suppliers. Secondly, carefully check terms and conditions and compare these against each other. Whilst many people skim over contracts, when it comes to insurance, you’ll want to make sure you have everything covered in the event of a claim.

Remember, every business is different and so it’s important to choose business insurance based on individual needs and nuisances. Most importantly, the cheapest cover doesn’t necessarily mean the best cover. For the sake of a bit more time reading,  in the long run you could also save yourself money and heartache.

What Insurance does a Small Business need?

The two tables below list the main types of insurance cover, which startups and small businesses need to consider. This isn’t intended as a comprehensive list, but it does include the main types of insurance. Remember, if you decide not to take out insurance, you put your business and finances at risk. Most importantly, if you’re a sole trader or partnership, the liability rests with you and your personal assets. See this How to Choose  a Business Structure blog for the pros and cons for each legal structure. types of business insurance table 1

Employers Liability

Certainly, the types of insurance cover you need will depend on the type of business. However, as mentioned, Employers Liability insurance is legally required if you employ staff. This insurance can cover you if an employee makes a claim. For example, if they suffer illness or injury as a result of working for you.

Business motor vehicle insurance is also another legal requirement. For instance, if you have business vehicles in order to provide a delivery service. This could be by truck or motorcycle etc.

Business Building, Contents, Equipment & Tools and Stock

As is the case with your own home, you need to have building insurance cover. Typically, people tend to combine this cover with contents as well.  These two insurances are also important for small businesses. With business building insurance, always check with your landlord first, if applicable. They may already have this in place, particularly if you’re renting an office or retail shop.

Regardless of whether you work from home or not, your business’s contents may not be covered by a home contents insurance policy. Please check your policy and consider business contents insurance in relation to your type of business as much as what contents you need insured. For instance, business contents covers general things like office furniture. For tradespeople, you might want to consider Equipment & Tools insurance. As a tradesperson, you’re likely to transport expensive tools during jobs and this type of insurance is specifically designed for you.

In addition, if you’re a shop or other retail outlet, including restaurants and cafes, it’s important to factor in stock. To varying limits and restrictions, you can obtain stock insurance to insure against loss, damage and theft.

Cyber Liability

With technology and AI advances, cyber liability insurance is an important consideration. Certainly, cyber attacks are becoming much more sophisticated. For instance, with increased scam emails and malware attacks. For a small business, a cyber attack could cost you your business.

Directors & Officers Liability

If you’re a Director or Officer of a company, it’s advisable to consider Directors & Officers Liability insurance. As a Director or Officer, you are considered the nominated and responsible person. This means you’re liable in the event of a health & safety breach. These types of claims and legal costs are very expensive, and can run into hundreds of thousands of pounds. Certainly, this depends on the circumstances, type of injury suffered or whether death was caused. It also covers you for financial reporting errors and pension misadministration.

types of business insurance table 2

Personal Accident 

Personal accident cover is a good insurance cover to consider, since it can cover you for serious injuries and death. For instance, if you need to make a claim as a result of an accident that means you’re unable to work. Different insurance providers offer different levels of cover, so be sure to check terms and conditions.

Product Liability

Product liability insurance can cover you if a customer suffers damage as a result of a product you’ve sold them, which then causes injury. This is important cover, even if you’re not manufacturing the product, since you could still be held liable.

Professional Indemnity

If your small business providing business advice or other professional service, you’re likely to need this cover. For example, massage and other types of therapists. If you provide a business-to-business service, a lot of clients require a certain level of professional indemnity insurance cover. Typically, this is built into client contracts and so before proceeding, it’s important you check these carefully.

Public Liability

Public liability is very popular and one that small businesses should consider taking out. It covers you against claims made against you by members of the public. As is the case with professional indemnity insurance, some clients may also require you to have this cover in place.

How much does it cost?

The cost of business insurance depends on a variety of factors. Firstly, the nature of your business can have a huge impact. For example, if you use heavy machinery or come into contact with the public. These are classified as higher risk and this can increase the cost.

The size of your business can also affect how much your insurance cover will be. For example, depending on how many employees you have, Employers Liability insurance will be affected.

In addition, the more equipment, tools and/or stock you hold, together with things like the level of turnover and size of your business premises. These can all affect the price of your insurance cover. For instance, larger buildings may be at greater risk of criminal activity. The location can also be a consideration if you’re close to anything that may cause damage. For example, a river or as a result of any other type of natural disaster.

Most importantly, the total insurance cost depends on whether you have any previous claims and how many different types of insurance policies you need/decide to take out. As a ball park figure, for professional indemnity, public liability and employer’s liability insurance, you’re looking at a few hundred pounds. This cost can either be paid annually as one lump sum or split into monthly payments.

When choosing business insurance, it’s important to find a legitimate and qualified provider. The British Insurance Brokers’ Association (BIBA) is the UK’s leading insurance intermediary. Therefore, an organisation you can trust in conjunction with completing a general online search as well as asking for referrals from people in your network, friends and family etc. Click on the link and input the type of insurance, together with your postcode for available options. In addition, you can also compare small business insurance quotes.

Further Reading

If you’re just starting out, read these blogs on how to start a business and how to choose a business name. These provide you with some checklists and tips to get your startup set up.

Finally, if you’re looking for some expert startup business advice or coaching services, contact Maximum Solutions Consulting Ltd. You can also visit the Business Advisory Services London and Business Coaching London pages to find out more.