A simples guide

Insurance in a small or medium sized business

For a small business, insurance can at first, appear confusing. With some thought however, it needn’t be, and this guide is aimed at helping you navigate the various types of insurance that are available. Some, you will find, are legal requirements, others you will need to assess on their merits.

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

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Types of insurance – the non-negotiable

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

Employers’ Liability Insurance 

It is the law in the UK that if you employ staff (someone employed for wages or salary under contract either oral or written) you must have minimum employers’ liability cover of £5m. Only in the event that i) your employees are family members or ii) they work abroad are their exemptions.

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

• Motor Insurance

If you use motor vehicles for your business, you are legally obliged to have motor insurance cover. It is your responsibility as the owner of the business to ensure that you have adequate insurance to cover all company vehicles.

Importantly, if your employees are using their own vehicles on company business you are not obliged to pay for their motor insurance cover. However, you are required to ensure that they have the minimum cover required by law. It is worth asking to ensure that your employees have disclosed the fact that they are using their personal vehicles for work purposes to their motor insurance provider.

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 a specialist insurance provider about the specifics of your business.

Other types of insurance to consider

• Commercial Property Insurance

Commercial property insurance covers the cost of repairing or rebuilding your business premises, your fixtures or fittings in the event of a number of insurable events:

  • Water damage
  • Wind damage
  • Fire
  • Flood
  • Subsidence

As with your normal home insurance, cover is broken down into building and contents cover. However policies for commercial property owners typically only cover landlord’s contents in most cases. A package policy would be more suitable for people wanting more than just the buildings insurance, such as Shop or commercial combined.

• Business interruption

If some unfortunate event hits 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 could hit profits for some time after the event and there may also be additional costs to cover in terms of third party fees and putting in place plans to keep trading.

You can insure against these losses by taking out business interruption cover. This type of policy will cover you for the loss of sales and profits during the period that you are unable to operate. You will need to discuss your individual requirements with your insurer as well as opening your books to them to assess what level of cover and premium to apply.

Make sure to check the basis of cover, for example increased costs of working or lost Gross profit. Also the indemnity period for example 12, 24 or 36 months.

• 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, insurance providers 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 is worth considering carefully.

• Product Liability Insurance

If your business designs, manufactures or sells on products, 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 is important to note that you can be held liable for faulty products even if you did not manufacture them.

Be sure to agree the insurance terms to ensure you are 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. This cover will sometimes be included when taking out public liability as part of a package, so may not always be stated separately to public liability.

Conclusion

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

No two businesses are the same and therefore no two sets of cover are identical. Use our business insurance comparison service to find the right deal for your business.

 

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