Business insurance
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What is business insurance?
Business insurance can cover you against losses if things go wrong in the course of your business activities. It can include cover for being sued for compensation, damage to your commercial premises, and more.
Is business insurance a legal requirement?
Legal requirements for business insurance can vary, depending on your business set-up.
Employers’ liability insurance is a legal requirement if you employ any staff at all.
Professional indemnity insurance can be required by some regulators and industry bodies, for example, for financial advisers, accountants, solicitors, and architects. You may also find that you’re required to have it to work in some other occupations, such as personal trainer, contractor, recruiter, private doctor or nurse.
Contracts for your services can require that you need particular types of insurance, such as public liability insurance.
You need to make sure you understand your obligations and meet them with adequate levels of insurance. It’s always best to check with your regulator and professional body, along with client contracts, to see what their guidelines and requirements are.
Do I need business insurance?
There are many things that you might want to protect your business against. For example, a key person leaving or an accident that damages your premises can both cause you serious losses. You may also become vulnerable to legal action by employees or clients. No one knows what’s around the corner, so having insurance for your business that could cover you if things go awry is worth considering.
What are the different types of business insurance?
There are several types of business insurance.
- Employers’ liability (EL) insurance: this is a legal requirement if you have even one employee. It can protect you against the cost of compensation claims if one of your staff gets injured or ill through working for you. If you don’t have this insurance in place, you could be fined £2,500 every day you’re not properly insured. Your policy must cover you for at least £5 million.
- Public liability insurance: offers you financial protection in case your business activities injure a member of the public or damage their property. If that person takes you to court, it could cover your legal costs and any compensation you might have to pay. Some customers might insist on public liability insurance before they work with you.
- Professional indemnity insurance: this isn’t a legal requirement but you might be asked to have it by other businesses you’re working with. Professional indemnity insurance can give you cover if a client says you’ve given them bad advice, or that your work has caused a problem, and they take legal action against you.
- Commercial buildings and contents insurance could protect your business premises and its contents if they're damaged because of flood, theft and fire.
- Landlord insurance: having landlord cover in place typically protects you if your rental property is damaged. You can also include protection against loss of earnings due to an insured event, such as burst pipes, which would mean you can't rent out your property for a period of time.
- Additional cover: you may also be able to add additional cover to your policies, such as business interruption insurance to help you if something prevents you from trading (although this is unlikely to cover claims from existing events, such as coronavirus) and key person life cover, to protect you from the financial impact if someone essential to your business dies or is diagnosed with a specified illness.
You can also choose to cover tools, equipment and stock in case they're damaged or destroyed. You may also want to consider specialist cyber insurance (unfortunately, we don't currently offer this) to protect you from losses relating to damage to, or loss of information from, IT systems and networks. This can supplement any cover in your exisiting policies and can help with the management of an incident.
If you own vehicles in relation to your business, you’ll also need to have car or van insurance.
Find out more about the different types of business insurance.
How much cover do I need?
This will depend on the size and nature of your business and what you want cover for.
Some of your customers might specify a certain level of employers’ liability insurance and public liability insurance before they’ll consider working with you. So you’ll need to at least match this level.
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 needed. It can also help to think about how much it could cost you to rectify a mistake, what you could be sued for as compensation, and legal fees, etc, to estimate how much cover you could need.
Cover levels for other types of insurance will depend on potential losses, for example, the rebuild costs of your premises, and the value of the stock you hold, among other things.
How much is small business insurance?
Even if your business is small, it’s important to protect yourself against the risks your company may face. Whether that’s loss or damage of stock, product liability or injury to/loss of your employees, there’s a lot to consider. You might think that insurance for all of this is expensive, but the cost of small business insurance depends on a number of variables:
- Type of business – do you own a business that works in a high-risk field? Investment, property and finance businesses may face greater risks and therefore need higher levels of cover.
- Level of cover – do you want to insure your company building or stock for a greater amount? The higher you’d like your pay-out to be, the more you’ll be expected to pay in premiums. Likewise, the level of excess you’re willing to pay will be a factor in determining your premiums.
- Size of business – although you may consider yourself a small business, how small is small? If you’re still manufacturing lots of products, or are responsible for lots of employees, you may find that premiums are more expensive.
Frequently asked questions
Do I need business insurance for an online business?
Just because your business is online, you should still consider the potential risks and cover requirements you may face. If you’re an online retailer, you’ll still have a level of stock that may require protection, and you might still have employees and therefore require employers' liability insurance.
You should treat your online business as if it were a business with premises, considering all the potential risks and the appropriate cover.
Will business insurance cover me for theft?
It depends on what’s stolen and what insurance cover you have, because there are different types of theft and different types of risks.
If you have business equipment insurance, this could, for example, cover you against the theft of laptops stolen from offices and home offices.
If you have valuable stock, stock insurance could help cover the cost of theft as well as any accidental damage. And if you run a shop, theft is usually covered - including cash left in the till overnight and losses resulting from 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 about how your business is set up (if you’re a sole trader or a limited company, for example). This means you can sort out your insurance right from the start, so you’re protected without having to register first.
Do I need business insurance if I’m self-employed?
If you employ anyone, including permanent or temporary staff or contractors, you’ll need employers’ liability insurance.
If you give advice, provide a professional service, handle client data or offer a professional service and could potentially be sued for negligence or making a mistake, then you’re likely to need professional indemnity insurance.
If someone could be injured or their property damaged because of your work, you should consider getting public liability insurance.
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.
How do I compare quotes for business insurance?
Whatever type of business you run, it’s easy to compare quotes with Compare the Market. Just give us a few details about you and your business.
How much does business insurance cost?
Size of your business
Cost is typically based on the size and type of your business
Type of your business
Manual businesses typically pay more than clerical ones
Size of pay-out
The higher you want your pay-out to be, the more a policy is likely to cost
What do I need to get a quote for business insurance?
As well as your type of business, the business name and its address and postcode, you’ll also need to provide:
- your business’s legal status eg: 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
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Emily Kindness
Business insurance expert
What our expert says
"With the amount of time and hard work you put into your business, along with it generating an income for you, it makes sense to ensure you have cover to protect you when things go wrong or accidents happen. Business insurance can cover you for all kinds of risks, so make sure you’ve got the right protection to suit your size and type of company."
