A simples guide

Insuring your small business

Running your own business can be the most satisfying job of all – you make the decisions and reap the rewards. Don’t forget the essentials though, they’ll keep your business functioning within the law. But business insurance can be a minefield of jargon making it confusing, so, here’s what you need to know about insurance for your small business.

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What insurance do I need by law?

If you employ other people (even just one), or have any volunteers, apprentices or work experience chaps, you’ll need employer’s liability insurance by law. This means that you’ll be covered if any of your employees suffers an injury or illness whilst working for you, where you are to blame.

You’ll need to make sure that you’re covered for at least £5 million but most insurers will offer £10 million. If you don’t have employer’s liability insurance when you need it then you’ll be fined £2,500 for every day you don’t have it.

There are a few exemptions from those needing employer’s liability insurance.

If you have any vehicles that you use for your business, then you’ll have to have third party motor insurance to cover you and any employees that will drive the vehicles. Your insurance must provide at least £1 million cover for property damage and an unlimited amount for personal injury.

Do I need employer’s liability insurance for everyone that works for me?

You need it for any staff you employ that have a contract or apprenticeship with you as well as any sub-contractors, volunteers or people on work experience. The contract doesn’t have to be formally written, it could be something you’ve agreed verbally or simply implied. As a general rule, you’ll probably need employer’s liability insurance if you:

  • Deduct national insurance and income tax from the wages you pay your staff
  • Decide where and when someone works
  • Provide the materials and equipment they work with
  • Employ someone who exclusively works for you – in other words they cannot get someone to replace them if they can’t work

What other types of insurance should I consider?

The small business insurance that’s right for you depends on what your enterprise is all about, here are some other types of insurance that you might want to consider:

  • Public liability insurance – this means that if a member of the public has an accident or has their property damaged because of you or your business or any perceived negligence, then you’ll be covered for any damages.
  • Product liability insurance – this will reimburse anyone who is harmed, or has their property damaged because of a faulty product that you’ve designed, made or supplied.
  • Professional indemnity insurance – if you provide professional advice (such as if you’re an accountant or solicitor) then this will compensate your clients if they end up losing money based on information you’ve given them.
  • Environmental liability insurance – this covers the cost of any damage done to water, land, protected plants and animals or habitats by your business.
  • Buildings and contents insurance – if you own your business premises then you’ll need to make sure it’s protected – a bit like your home. Make sure you’re covered for the full amount it’ll cost you to rebuild and contents cover should compensate you for the cost price of your goods (not profit). If you’re a landlord, you’ll need to include fixtures and fittings or any improvements made by your tenants.

How much will insurance cost me?

Your small business insurance is very dependent on the nature of what you do and your premium’s are based on multiple factors that take in to account the likelihood of you needing to make a claim. For example, the more staff, the more likely one of them is to have an accident which will be reflected in your premium. Similarly, if you’re looking at insuring your building and contents, providers will assess the risk of them being affected by fire, flood or theft.

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So how can I get the best deal?

If you run a business, chances are you’ll always be looking for the best deal out there. Which is where we come in, the only way to really know what’s on offer is to compare the market, which you can do right here. And if you’ve got any concerns, questions or would just prefer to chat to someone who really knows what they’re talking about – we can call you back to go through your options.

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