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What is business insurance?

Business insurance can give you financial protection if something goes wrong while you’re carrying out your business activities.

Business insurance can be tailored to cover the specific needs of your unique business. Whether you have a team of employees or are a one-person outfit, the right cover can help make sure you and your livelihood are protected. 

Business liability insurance is designed to cover the cost of legal fees and compensation claims made against your business. It can be invaluable if you’re sued by an employee, client, customer, investor or member of the public.

The three main types of business liability insurance are:  

  • Public liability insurance: This offers you financial protection in case your business activities injure a member of the public or damage their property. Some customers might insist on public liability cover before they work with you.
  • Employers’ liability insurance: A legal requirement for those with staff, this can protect you against the cost of compensation claims if one of your staff gets injured or ill working for you. If you don’t have this insurance, you could be fined £2,500 every day you’re not properly insured. Your policy must cover you for at least £5 million.
  • Professional indemnity insurance: This can cover you against financial loss if a client claims they’ve lost money because you’ve given them bad advice, or that your work has caused them a problem, and they take legal action against you. 

We compare prices across many well-known business insurance suppliers, including:

Is business insurance a legal requirement?

Legal requirements for business insurance can vary, depending on your business set-up and what your business does.  

Employers’ liability insurance is a legal requirement if you employ any staff who aren’t direct family members.  

Professional indemnity insurance can be required by some regulators and industry bodies; for example, for financial advisors, accountants, solicitors and architects. You may also find that you need it to work in other occupations, including as a personal trainer, contractor, recruiter, private doctor or nurse.  

Contracts for your services can require you to have particular types of insurance, like public liability insurance.  

You need to understand your obligations and meet them with adequate levels of insurance. It’s always best to check with your regulator and professional body, as well as checking client contracts, to see what their guidelines and requirements are.  

As well as the legal requirements, there are many other things you might want to protect your business against. For example, a key person leaving or an accident that damages your premises can cause you serious losses. No one knows what’s around the corner, so having insurance for your business that could cover you if things go wrong is worth considering.

From construction sites to cocktail bars, and finance to food, you can find insurance that’s specially designed for more than 1,000 types of business. We’ve teamed up with Simply Business to offer you tailored quotes from leading business insurance providers.

How much does business insurance cost?

Cost is typically based on the size and type of your business, as well as the size of the potential pay-out you might want. Things that will affect the cost include: 

  • Type of business – do you own a business in a high-risk field? Investment, property and finance businesses may face greater risks and could need higher levels of cover.
  • Level of cover – do you want to insure your company building or stock for a large amount? The higher you’d like your pay-out to be, the more you’ll be expected to pay in premiums.
  • Level of excess – how much you’re willing to pay towards a claim (your excess) will be a factor in determining your premiums. There’s always a compulsory excess you have to pay. By choosing a higher voluntary excess on top of that, your premium is likely to be cheaper, but you’ll need to pay more when making a claim.
  • Size of business – if you’re manufacturing lots of products, dealing with large contracts, have a high turnover or are responsible for lots of employees, you may find that premiums are more expensive. 

What other insurance does a business need?

Depending on your type of business, you might also need

  • Product liability insurance: This could offer you protection against compensation pay-outs and legal costs if someone is injured or their property is damaged by a product you sold them. This is often added as a paid-for extra to public liability insurance. 
  • Commercial buildings and contents insurance Commercial property insurance could protect your business premises and its contents if they’re damaged because of flood, theft or fire.
  • Landlord insurance: Having landlord cover typically protects you if your rental property is damaged. You can also include protection against loss of earnings due to an insured event – burst pipes for example – as that would mean you can’t rent out your property for a period of time.
  • Additional cover: You might be able to add additional cover to your policies at extra cost, like business interruption insurance to cover you if something prevents you from trading (although this is unlikely to cover claims relating to coronavirus).
  • Key person cover: This can protect you from the financial impact if someone essential to your business dies or is diagnosed with an illness listed on the policy.

You can also cover tools, equipment and stock in case they’re damaged or destroyed. 

 You may also want to consider specialist cyber insurance (we don’t currently offer this) to protect you from losses caused by damage to your IT systems or loss of information from them. Some cyber insurance policies provide services including IT support and legal help. 

If you own vehicles that you use for your business, you’ll also need to have business car or business van insurance.  

Find out more about the different types of business insurance.

What level of business insurance do I need?

This will depend on the size and nature of your business and what you want cover for. Think about the everyday risk involved with the type of work you do and what you’ll need to be protected against. 

Some of your customers might specify a certain level of employers’ liability insurance and public liability insurance before they’ll consider working with you. You’ll need to at least match this. 

Some professional bodies set out minimum levels of professional indemnity insurance for their members. These levels can be based on turnover, income, minimum cover amounts and so on. Again, some client contracts will specify the minimum level of cover they need you to have to work with you. It can also help to think about how much it could cost you to put right a mistake, what you could be sued for in compensation, plus legal fees and so on, to estimate how much cover you could need. 

Cover levels for other types of business insurance (also known as commercial insurance) will depend on potential losses; for example, the rebuild costs of your premises and the value of the stock you hold. 

Small business insurance

If you run a smaller business, your needs are probably going to be different to those of a multinational company. Fortunately, small business owners can find cover that’s geared towards them. A small business is defined by the Government as employing fewer than 50 people and having a turnover of under €10 million. 

Firstly, it’s important to assess the risks facing your firm before choosing small business insurance. For instance, if you’re an accountant, professional indemnity insurance can cover you if clients lose money because of advice you’ve given them. Or if you own a hair salon, product liability insurance could protect you against claims arising from the use of defective products or negligent application.  

Many insurance providers offer business insurance packages aimed at particular types of small business. Depending on what you need to cover, you might want to think about policies for:  

When you get business insurance quotes, you’ll be asked questions about the size of your business and what you want covered, so you can be offered the right option for you. Whatever business you have, you’ll need employers’ liability cover if you have any employees.

The advantages of additional business insurance

Because every business is different, business insurance can be made up of various add-ons, to tailor your policy to suit your individual needs. For example, a hairdresser would need different cover to a financial advisor. Benefits include:  

  • Flexibility – you can choose the additional cover you need for your particular trade or profession, in addition to any insurance that is legally required. This gives you the flexibility to build the right package for your set-up.  
  • Peace of mind – protecting your business from a range of unforeseen circumstances gives you reassurance that you won’t be hit with an expensive bill if things go wrong. 
  • Credibility – business insurance shows potential clients and customers you’re a safe pair of hands. If anything goes wrong with the work you do for them, you have a way of compensating them.

The disadvantages of additional business insurance

With so many business risks to think about, it can be difficult to know if you’ve got exactly the right level of protection you need. This is important, because the cost of adding lots of extra cover to your policy can be expensive. If you’re a smaller company, make sure you prioritise key parts of your business. You should also look to avoid any overlaps in your cover. Business owners can sometimes be covered for the same risks twice. This means you might end up paying more than you need to and it could cause complications if you need to make a claim. Finally, you should look out for any claim limits, before taking out a policy. Check you’re covered for everything you need, with enough protection in place against the risks your company faces.

How to reduce the cost of your business insurance

There are several ways you can cut the cost of your business insurance, including: 

  • Lower your liability risk - Reducing risk, like installing a security camera or giving all your employees health and safety training, is one of the major things you can do to bring down the cost of your premiums.
  • Show that the business is well run - Insurance providers like businesses that have a solid track record of being well managed. It’s important to show evidence of this through risk assessments, quality-control procedures, financial accounts, professional accreditations and employee training.
  • Bundle your insurance together - Many insurance providers will let you combine all your essential business cover into one policy. This can be more cost-effective than taking out separate insurance products.
  • Don’t renew automatically - You might be able to save each year by shopping around for the best deal on your business insurance when your policy is up for renewal. You can compare business insurance quotes online with Compare the Market. 

About Compare the Market 

We know comparing insurance and utilities isn’t much fun. So at Compare the Market it’s all about keeping it simple. We help you find the right product at the right price. And you can trust us to be impartial – we only make money when you switch or take out a new product, so it’s in our interests to help you make the right choice. Comparing with us is about the enjoyable stuff too – we love to reward you with Meerkat Meals and Meerkat Movies when you take out selected products with us.

Frequently asked questions

Do I need business insurance for an online business?

Online businesses also face risks, and can be legally or professionally required to have insurance. If you’re an online retailer, you’ll still have stock to protect. You might have employees, which means you must have employers' liability insurance if they’re not members of your immediate family.

Does business insurance cover theft?

It depends on what’s stolen and what insurance cover you have.  

  • Business equipment insurance could cover you against the theft of laptops stolen from your office or home office, for example.  
  • Stock insurance could help cover theft of valuable stock as well as accidental damage. It could also cover theft if you run a shop and even losses caused by dishonest employees. 

Can I get business insurance before registering my business?

Yes, you can get business insurance before registering your business and even before you’ve started trading. When you buy business insurance, you won’t usually be asked for your company registration number or any other business registration details. But you’ll typically be asked about your business address, your trade type and your actual or projected turnover. You could also be asked how your business is set up (whether you’re a sole trader or a limited company, for example).

Do I need business insurance if I’m self-employed?

If you’re self-employed, you’ll need business insurance if:  

  • you employ anyone outside of your direct family, including permanent or temporary staff  
  • you give advice, provide a professional service or handle client data and could potentially be sued for negligence or for making a mistake  
  • someone could be injured or their property damaged because of your work. 

It’s worth knowing that, as a self-employed person, you’ll most likely be able to claim for all your business insurance as an expense against tax.  

Can I add cover for a different trade to my business insurance policy?

It’s not uncommon for businesses to branch out and offer different services. Let’s say you have a café but also offer an outside catering service. In this case, you’ll need extra cover, which can be included in one policy.  

When you start a quote with us, you’ll have the option to add a secondary trade to your policy. You’ll be able to choose from more than 1,000 options to describe your trade. If you can’t find a close match to your type of work, or need to cover a third trade or profession, give our trusted partners Simply Business a call on 0333 016 5956 for a personalised quote.  

Lines are operated by our trusted partner, Simply Business. Open Monday, Tuesday, Wednesday and Friday 9am-5.30pm, Thursday 9.30am-5.30pm, Saturday 9am-2pm.

Can I still get business insurance if I’ve had CCJs or IVAs?

If your business has suffered debt problems and you’ve had a County Court Judgement (CCJ) or Individual Voluntary Arrangement (IVA), you may still be able to get business insurance. Each provider looks at CCJs and IVAs differently – it can depend on how strict their rules are. You might have fewer options and may need to find a broker who specialises in business insurance if you have bad debts or bankruptcy issues.

Will changing from sole trader to limited company affect my business insurance policy?

Yes, the legal structure of your business will change, so you’ll need to contact your insurance provider. They’ll most likely cancel your existing policy and replace it with a new one that covers your change of company status. The price of your premium might also change.

What do I need to get a quote for business insurance?

As well as telling us your type of business, the business name and its address, you’ll also need to provide:  

  • Your business’s legal status. For example, sole trader/partnership/limited company  
  • How long you’ve been trading  
  • Forecasted turnover for the next 12 months  
  • Number of employees and how many do solely clerical work 
  • Whether you operate in high-risk environments  
  • If you have other business premises  
  • Any claims history  
  • What cover options you want and when you want your policy to start.  
Page last reviewed on 29/06/2022
by Emily Kindness