A simples guide

Small business insurance

If you’re one of the 5.4 million small businesses (estimated at beginning of 2015), that operate around the country, then you’ll know just how important planning for the future can be. You’ll appreciate that being the boss means having to keep an eye on the ball at all times regardless of whether times are tough or you’re on a roll. So it can be reassuring to know that someone’s looking out for you – which is why investing in commercial insurance tailored to your small business is vital. Here’s what you need to know.


What is small business insurance?

Business insurance isn’t just for companies with an office block full of people, it can be tailored to suit any business even if you’re a one man (or woman) band or teaming up with a partner. The core types of business insurance are:

• Employers’ liability – you’ll need this by law if you employ anyone at all, even just one other person. If you don’t have employers’ liability insurance when you need to then you can be fined £2,500 for every day you go without it. The only exception is family run businesses where all your employees are closely related to you.

Employers’ liability will cover the cost of compensating employees who are injured or become ill through work, it should also include the cost of any associated legal fees. It should cover all permanent, part-time, casual employees and labour only sub-contractors. Your policy should also cover temporary workers such as students or anyone on work placement.

As a general rule if you deduct National insurance and income tax from someone’s wage slip or define where, what hours and the working conditions of someone then you’ll need employer’s liability insurance.

• Public liability – this isn’t a legal obligation but it’s certainly a very useful thing to have. Public liability insurance will cover the cost of claims made by the public should they injure themselves or have their property damaged in connection to your business. It should also include the cost of legal fees.

It’s an important type of insurance to consider if your business has any dealings with the public. It doesn’t matter whether you’re based from home, an office, shop or take your business out and about – having a policy in place could save your bacon one day.

It’s easy to think that a claim against you won’t happen but accidents by their very nature and definition, can’t be second guessed. They can happen at any time and usually for the silliest of reasons – all it takes is someone to trip on a step, fall and break their ankle for a claim to be made. Or if you’re a handyman and accidently spilled paint onto someone’s carpets – the point is, accidents can be minor but can you afford the financial repercussions (especially if you’re self-employed?)

• Professional indemnity – if you provide professional advice to customers, then this is the one for you. It compensates clients for loss or damage that results from advice you or your business has given them. Whilst not a legal obligation, some professional bodies require their members to have this cover – such as accountants, solicitors, architects and financial advisors.

Professional indemnity usually works on what’s known as a ‘claims made’ basis. This means that you’ll only be covered for claims made whilst the policy is active. For example, an incident happens in 2015 when your policy was still active, but the client decides not to claim damages until 2016 – when your policy has expired (and not renewed). In this case, you won’t be covered by your policy because it wasn’t active when the claim was made.

But do I actually need it?

Business insurance can provide you with peace of mind, it just means there’s a safety net in place should you need it. You can also tailor your business insurance – whether its protecting your tools of the trade or taking out insurance to cover you for loss of IT systems and information – there’s a policy to suit you. It’s not always a question of whether you need it but more can you do without it?


But I work from home – do I still need business insurance?

Just because you work from the safe cocoon of your home, doesn’t mean you should forego business insurance. Depending on what you do, your standard home insurance policy may not be enough to cover you or the risks involved with operating from home. If you have stock or equipment you could find your policy comes short or even become invalid.

If you welcome people into your home in connection to your business, then you might want to consider public liability. Even though you’re operating from your home doesn’t mean that claims against you can’t be made. The same goes for professional indemnity insurance, you might work on your own and only have a handful of clients but that doesn’t mean you’re at any less risk of something going a bit wrong.

How do I compare small business insurance?

Your insurance premium will be based on various factors such as the nature and size of your business, how much cover you need and your claims history. At comparethemarket.com we make it easy for you search for small business insurance online or if you want to have a chat about your exact needs with a real human being, then ask us for a call back – one of our experts will only be too happy to guide you through the options – because we’re here to make life simples.

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