A simples guide

A guide to business insurance

For a small business in particular, insurance can at first appear daunting. With some thought however, it needn’t be. This guide is designed to help you compare the various types of insurance that are available and which might be right for you.

It’s worth shopping around for cover as the insurance industry is a competitive place. More competitive rates can be achieved by taking out insurance cover for each risk separately. Bundling your insurance and combining cover with one insurer may seem easier but it can also be more expensive.

Let us now turn our attention to the types of insurance that you should consider.



For businesses of certain types, some insurance is required by law.

Employers’ Liability Insurance

It’s the law in the UK that if you employ staff you must have at a minimum, employers’ liability cover of £5m. There are a few exemptions, so it’s worth investigating this fully before deciding you don’t need the cover.

If you don’t obtain this cover, you’re liable to be fined up to £2,500 per day that you don’t have cover. Note that you must also display your certificate or have it available for inspection on your premises. Failure to do so can result with a fine of £1,000.

Employers’ liability cover (EL) covers you in the event that your employees are injured, die or become ill as a result of working at your premises. Being sued for compensation can be expensive both in terms of any payout but also as a result of legal expenses. EL insurance covers you against this.

Commercial Motor Insurance

If you use motor vehicles for your business you’re legally obliged to have motor insurance cover. It’s the responsibility of the owner of the business to ensure that there is motor insurance in place to cover all company vehicles.

Importantly, if employees are using their own vehicles on company business you’re not obliged to pay for their motor insurance cover. However, you’re required to ensure that they have the minimum cover required by law.

It’s worth asking your employees whether they have disclosed to their insurance provider that they are using their personal vehicles for work purposes.

Commercial motor insurance is much the same as private motor insurance with the usual types of cover:

- Third Party Cover
the minimum cover required by law. Covers you against costs that arise as a result of injuries to other people and damage to their vehicle or property.

- Third Party Fire and Theft
This type of policy covers everything basic third party polices cover with added protection against your vehicle being stolen or destroyed in a fire

- Comprehensive Cover
This type of insurance, as the name suggests, is the most comprehensive cover available and covers:

  • injuries to other people and damage to their vehicle
  • your vehicle being stolen or destroyed in a fire
  • accidental damage to your vehicle
  • medical expenses
  • the cost of replacing your vehicle's contents

Note that if you run a business which by its nature revolves around the use of vehicles, for example couriers or a taxi firm, specialist motor policies are available and you should talk to the provider about the specifics of your business.

Other types of insurance available include the following:

Commercial Property Insurance

Commercial property insurance covers the cost of repairing or rebuilding your business premises, your fixtures, fittings or stock in the event of a number of risk losses including:

  • Water damage
  • Storm damage
  • Fire
  • Flood
  • Subsidence – landslip and ground heave

As with your normal home insurance, cover is broken down into building and contents cover.

Buildings insurance

Buildings insurance covers the cost of repairing or rebuilding your business premises if damaged or destroyed. Though buildings insurance is not required by law, it’s strongly suggested that you take out cover.

Even if you own your building outright, you will still require cover in the event that you needed to repair or re-build your building. If you rent your business premises, it’s the duty of the landlord to ensure that buildings cover is provided. You may however wish to discuss with them the level and detail of cover required to ensure that you believe it’s sufficient.

Remember that the important number to insure when looking at your building is the cost to rebuild it, not its current market value.

Unless you have specifically requested it, and therefore paid an additional premium, most commercial building will not cover you for:

  • General wear and tear – everyday things that happen to your property over time such as carpets or wall coverings discoloring.
  • Acts of war or terrorism – buildings insurance policies usually exclude damage caused by terrorism, but specialist insurers can provide cover for commercial properties for an additional premium.

Contents insurance

Your commercial contents insurance covers you for the cost of replacing damaged or stolen items within your premises. Importantly for some businesses, this includes items of material or finished goods held in stock.

It’s important to discuss the valuation of your stock and equipment with the insurer or broker when arranging cover. If your business has any cyclical variations be sure that these peak periods are covered.

Business interruption

In the event of a significant loss event hitting your business, for example a large fire, the loss of your buildings or stock may actually be of secondary importance in a financial context. Your inability to trade will hit profits for some time after the event and there may also be additional costs to cover in terms of third party fees and business continuity plans.

You can insure against these losses by taking out business interruption or continuity cover. This type of policy will cover you for the loss of sales and profits during the period that you’re unable to operate, as well as any overheads such as rent, compulsory rates and wages you’ll have to carry on paying even while you’re not up and running.

Professional Indemnity Insurance

If your business provides other businesses or individuals with professional advice, you should almost certainly consider professional indemnity insurance (PI) in the event that your advice turns out to be incorrect and results in financial loss for your clients.

Banks, insurers themselves, law firms, accountancy professionals, architects all require PI cover for their business. You should think wider than this though even if your business is not an institution such as these.

Do you provide IT support or IT skills, do you send consultants to client’s premises? Your services may include elements that would benefit from PI cover so it’s worth considering carefully.

PI cover is a specialist area of insurance and policies can differ quite widely. Be sure to read carefully the terms of the cover to ensure that you have the cover that you require.

  • Does the policy comply with the standards set by your profession’s governing body or professional association?
  • Are errors and omissions, damage from latent faults and claims arising out of a failure to meet time limits all included?
  • Are stipulations provided on what to include – and what not to include in your client contracts?

Professional negligence claims can be complex and often run for a protracted period of time. Legal bills can be very significant. Ensure that you know exactly what both your obligations, and those of the insurer are, in the event of a claim.

Product Liability Insurance

If your business designs, manufactures or sells on physical products rather than professional services, product liability insurance maybe something for you to consider.

Your business may be held legally responsible for any injuries to people or damage to property caused by a faulty product. It’s important to note that you can be held liable for faulty products even if you did not manufacture them.

Your liability stretches to cover any situation where:

  • Your business’s name is on the product.
  • You have repackaged the product
  • Your business repairs, refurbishes or changes a product.
  • You imported the product from outside the European Union.
  • You cannot identify the product’s manufacturer, or the manufacturer has gone out of business

As with most types of insurance, you’re better covered if you have good business and risk management practices in place. If you’re a wholesaler and do not manufacture, your cover should protect you provided you have undertaken good business practices such as:

  • Proving that the products have not been changed and were therefore faulty when they were supplied to you.
  • Ensuring that your customers are given adequate safety instructions and warnings about misuse.
  • You include terms for the return of faulty goods to the manufacturer.
  • You have put in place contracts with your manufacturer that guarantee product safety, quality control and returns.
  • All of this is supported by good quality control and record-keeping systems.

Be sure to agree the insurance terms with your insurance provider to ensure you’re happy with any restrictions. Often insurance of this type will not cover you if the loss occurs as a result of your negligence or poor workmanship.

‘Key-man’ Insurance

No, this is not concerned with losing your keys, but it’s a potentially important consideration for a business. If you rely on a single or a few very important people, perhaps a star salesman, perhaps even the owner, you should consider what happens in the event of incapacitation of that individual.

‘Key-man’ insurance can provide protection in the event that this individual is unable to be productive for your business for whatever reason. The policy will pay out a lump-sum amount, dictated in the policy, in this event which can be used to offset the loss in sales and profit brought about by the circumstances.

Credit Risk Insurance

The financial press has seen many stories in recent years of the struggles small businesses in particular face in getting paid. No business ever goes bust because they lack profit, they go bust because they run out of cash.

Credit risk insurance is worth considering if you have any doubts over your ability to turn debtors into cash. This can be important if you have a high concentration of sales with a small number of customers or if you have a general worry over creditworthiness (although obviously you should be considering this before offering credit terms!)

You need to ensure that you have this cover in place before things begin to go wrong and you will need to prove to your insurance provider that you operate good financial practices to mitigate the chances of default on debts owed to you.

Terrorism / Kidnap Insurance

Many building insurance policies specifically exclude terrorism from the situations they cover. This does not mean that you must be uninsured in the event of an attack.

Many insurers now offer specific policies that cover businesses in the event that their business is caught up in an atrocity. Similarly for businesses that operate in dangerous or sensitive areas of the world, kidnap and ransom insurance is available from certain specialist insurers to cover your people in such an unfortunate event.


In general, if the risk exists, the chances are there will be an insurance provider who will cover it. That’s why it’s worth spending the time to properly evaluate the risks that your business faces is so important.

No two businesses are the same and therefore no two sets of cover are identical. With such a myriad of different types of insurance it’s understandable that you may feel slightly over-awed or fearful of the costs.

Don’t be.

It can often save you a lot of money by comparing and buying these insurances separately. Although often considered easier, bundling can result in higher monthly premiums. Comparing insurance today couldn’t be easier so start a quote with us today and see how much you could save.

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