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.