Business insurance: a simple guide

From professional indemnity insurance to employers’ liability insurance, use our guide to help you decide on the right types of insurance for your business.

Written by

Mubina Pirmohamed

Business and landlord insurance expert

Posted

31 DECEMBER 2021

4 min read

What is business insurance?

Business insurance can protect you against losses incurred during the running of your business – for example, if a customer or employee makes a claim against you, or if your equipment is damaged.

The terms ‘commercial insurance’ and ‘business insurance’ are often used to describe employers’ liability and public liability insurance – the two main types of business insurance. But there are other types of insurance available, each one covering a slightly different aspect of business.

And as each policy is different, it’s important to know what’s actually covered by your business insurance so you can fill in any gaps.

The different types of business insurance that you need to be aware of are:

Read on to find out about the different types of business insurance, so you can decide which you might need for your business.

Public liability insurance – for injured clients or their damaged property

If a client slips and falls at your business, or you accidentally damage something of theirs while you’re working, this insurance could cover the cost of claims and legal fees.

Employers’ liability insurance – for any business with employees

You’re legally required to have this insurance if you have any employees at all, even just one – temps, part-time or full-time. It can help cover the cost of claims made against you if an employee is injured or gets ill while working for you.

The only possible exception would be businesses who employ immediate family members. However, not having insurance would mean you are not protected against claims made by those employees.

If your business is a limited company, with multiple directors, employers' liability insurance is a legal requirement. This is regardless of immediate family members being employed.

Product liability insurance – for the products you supply

This can help compensate anyone who has suffered damage or injury because of a product you designed, repaired, or supplied. You don’t have to be the manufacturer to be liable for damages.

Professional indemnity insurance – for a client’s lost sales or damaged reputation

Professional indemnity insurance is for businesses that offer knowledge, skills or advice as part of their work. If you work leads to a client’s loss of sales or damaged reputation, this insurance can help cover the cost of legal fees and claims.

Business interruption insurance – keeps finances running when your business can’t

Taking out a business interruption insurance policy will cover you for loss of sales and profits during a period that you’re unable to operate due to unforeseen circumstances like floods or fires.

Business contents insurance – for the physical contents of your business

Contents insurance for the things that make your business tick – for example, computers, mechanical equipment, tools, machines and stock.

Did you know?

If you run a home-based business, work-related items, like computers, stock and tools, might not be covered by your home insurance. You’ll need to tell your home insurance provider you’re working from home, as it could invalidate your policy if you don’t. They may amend your policy, or depending on your business, you might need to take out separate business contents insurance for your work-related items.

Key-man insurance – for your valuable employees

If there are particular people who keep the business going, you can insure them. Then, if for some reason those individuals can’t work, you can be compensated for that loss.

How can I compare cheap business insurance?

Getting your business covered isn’t about finding the cheapest option; it’s about finding the right package at the right price. Use our business insurance comparison service where we’ll bring you a choice of insurance providers based on your needs, so compare today and see how much you could save.

Frequently asked questions

Which types of business insurance are mandatory?

The only type of business insurance required by law, is employers’ liability insurance. You must have this if you employ staff, even on a casual basis.

However, regulatory bodies for some professions might also require you to have specific insurance to practise. For example, solicitors and accountants typically need professional indemnity insurance.

If you work as a tradesperson, some companies and organisations may insist you have public liability insurance in place before they’ll offer you a contract. For example, government and local authorities typically require that you have between £5 million and £10 million of public liability insurance.

Should I buy standalone policies or a bundled business insurance package?

Many insurance providers offer business insurance packages specifically aimed at small businesses.

The benefit of a business insurance package is that it can be tailored to your specific type of trade, so you’re only paying for the cover you need.

We’ve teamed up with Simply Business to offer tailored quotes specifically designed for more than 1,000 types of business. For example:

Another benefit of bundling your business insurance under one policy is that it can be more cost-effective than buying standalone cover for separate insurance products.

What types of business insurance would I need if I work from home?

If you run a home-based business, you may need to consider:

Employers’ liability insurance – if you employ anyone.
Public liability insurance – if customers or clients visit your property.
Business contents insurance – for your stock or business equipment (these are not likely to be covered by your home insurance).
Professional indemnity insurance – if clients make decisions based on your professional advice.
Product liability insurance – if you design, make or supply products.

Find out more about business insurance if you work from home.

What other types of insurance might I need?

Building a successful business takes a lot of hard work and determination, so you’ll want to ensure it’s protected. Business life insurance offers financial protection for your business, if something should happen to you or your key workers.

If you’re self-employed, you may want to consider income protection insurance. This can help cover your loss of income if you become ill or injured and are unable to work.