Small business insurance

You can’t predict the future, but you can make sure you have protection in place for your business by getting the right small business insurance. It means that you’re covered in the event of unforeseen costs and claims, just when you need help the most.  

You can’t predict the future, but you can make sure you have protection in place for your business by getting the right small business insurance. It means that you’re covered in the event of unforeseen costs and claims, just when you need help the most.  

Emily Kindness
Business insurance expert
minute read
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Posted 30 NOVEMBER 2020

What is small business insurance?

Small business insurance is simply a type of business insurance that better caters for smaller businesses. If you run a smaller business, your needs and priorities are probably different from those of a big national chain. If you work with a more bespoke product or service, you can find specialist cover that’s tailored to you.

Why do I need small business insurance?

Small business insurance is there to help you deal with any unexpected difficulties your business may face, which ultimately lead to damages or a loss of earnings. With the right cover, small business insurance can help you get back up and running, and could cover any loss of profits if you have to close for a period. It can provide vital protection for small and start-up businesses, where any loss of earnings can seriously impact your company.

Some types of cover are a legal requirement, like employers’ liability insurance if you employ any staff and motor insurance if you use vehicles for work. But what other cover you need will depend on your business. It could be worth protecting yourself against:

  • Claims from customers
  • Business interruptions (although you probably won’t find cover for COVID-19 related interruptions)
  • Damaged property or stock

What insurance should a small business have?

The types of cover a small business might need include:

  • Public liability insurance - offers financial protection if your business is responsible for injuring a member of the public, or damages their property.
  • Employers’ liability insurance - if you have any employees, this insurance is a legal requirement. It protects you against claims made by employees against you.
  • Professional indemnity insurance - this is designed to protect you against the potential costs of a client seeking compensation from your business, for bad services, work or advice. Although not a legal requirement, many businesses, associations or clients may require you to have this before working with you.
  • Equipment insurance - typically covers tools, machinery and computers
  • Stock insurance - if you’re dealing in expensive or large amounts of stock, you may want to insure against their theft or damage.
  • Buildings and contents insurance - just like you’d insure your home, this covers your business property and its contents against things like flooding, fires and theft.

Do I need to get specific insurance for my business?

Whether you run a guest house, work from a home office or own a restaurant, your business insurance needs will be different. The size of your business may also make a difference. Large businesses may require a higher level of cover, but small and medium enterprises (SMEs) that specialise in a particular or more unusual service/product may need a more tailored policy.

It’s important to assess the risks that face your particular business and choose appropriate insurance. For example, if you’re an accountant or a solicitor, professional indemnity insurance can cover you if clients lose money because of advice you’ve given them. Or if you rely on computer systems, a cyber policy could help cover you for loss, interruption and damages to clients.

Here are some of the examples of the businesses we quote for, each with their own policy options:

Do I need to get employers’ liability insurance?

If your small businesses has one or more employees, you're legally required to have employers’ liability insurance to cover you if a member of staff suffers an injury or illness as a result of something that’s happened at work.

You’ll most likely need employers’ liability insurance if you:

  • deduct national insurance and income tax from wages
  • decide when and where people work
  • provide tools and materials
  • have people working exclusively for you that cannot be easily replaced.

Part-time, permanent, casual and temporary workers should all be covered by your policy and it’s worth checking if any unpaid help is covered too.

If you only employ close family, you may be exempt. But if you’re a limited company, you’ll still need the cover regardless.

Your policy must cover you for at least £5 million, as legal costs and compensation can easily spiral. Most policies will cover you for £10 million.

You could be fined £2,500 for every day you don’t have employers’ liability insurance when you need it. If you can’t show your insurance certificate when asked, you could be fined a further £1,000.

How much will small business insurance cost?

The cost of your insurance will depend on a variety of things. It’s important to really consider what your business is at risk from and get a policy that will cover you adequately. So, think about need first, cost second.

While every business is different, here are some of the things that can affect the cost of small business insurance:

  • Size of business – there’s actually quite a lot of room within what a ‘small’ business actually is. You might be small compared to one of the trillion-dollar megacorps, but it’s all relative. The size of your business can refer to the number of employees you have, the amount of real estate you operate out of, as well as the amount of stock you move.
  • Type of business – what sort of business are you operating? Is there a high-level of risk, such as investments, financial services or property management, or perhaps you work with antiques? These sorts of businesses may require more specialist cover, which can be more expensive.
  • Level of cover – of course, the amount you’d like to be covered for affects the amount you’ll pay. It’s a simple trade-off: the greater the pay-out you’re after, the more you’ll be expected to pay in premiums. However, you could look to offset some of that with a higher level of excess that you’re willing to pay.

Do I still need business insurance if I work from home?

It depends on the type of business you run. If you have equipment or store stock at home, you could find your regular home insurance policy won’t cover you for loss or damage. You might even find that working from home cancels out your home insurance policy should you need to claim.

It’s better to play it safe, so, if you’re planning on working from home, check your policy documents carefully and read the T&Cs to find out if you’re covered, or if you’ll need to take out separate insurance. Also, if you invite customers into your home, then it’s worth looking at public liability insurance because this will help cover you if a client suffers an injury or damage to their property and makes a claim. You should also consider professional indemnity insurance, whether you’re working from home or not.

Do I need professional indemnity insurance for my small business?

It’s not an insurance that every company will need. It applies to businesses that offer knowledge, skills or advice as part of their work. It might be needed by a self-employed individual like a consultant, an accountant or a company. Certain industries require professionals to have this insurance under regulation, and sometimes client contracts will specify a certain level of professional indemnity insurance is necessary.

Get a full overview of professional indemnity insurance.

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