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Our Guide to Small Business Insurance
Starting and nurturing your own business takes time and patience which is why business insurance is necessary to safeguard and protect your hard work. This is why it is important to consider the different types of insurance your business needs.
Business insurance helps you prepare for the worst, and you feel protected should the worst happen. From covering accidental mistakes to theft or damage, insurance has your back and you’re not out of pocket if your business runs into any trouble.
Depending on your business, certain types of insurance are mandatory, but for most small businesses insurance is more for piece of mind rather than legally mandated. Our blog goes through the most common types of insurance available for small businesses.
Different types of Small Business Insurance
Employers’ Liability Insurance
Employers’ liability insurance is the only compulsory insurance for small businesses. If your business employs people, employer liability insurance is a legal requirement or you may face a £2,500 a day fine. The insurance should be from a trusted provider and have a minimum cover of £5 Million.
The reason for Employers’ Liability insurance is to cover any workplace-related injuries or illnesses during the time of employment. Your employee can rightfully sue you for any injuries or illnesses which can occur. The insurance helps you settle claims without using your company funds to do so.
NB: If you are the sole director, shareholder and PSC of the company- you do not need Employers’ Liability. It is only for businesses with employees.
Professional indemnity insurance
If your business provides advice in any way, you may want to consider professional indemnity insurance. This insurance will protect you against compensation claims made by clients who may think you have made a mistake in your work. This also covers things such as breaching confidentiality, infringing copyright, or giving advice that causes your client to lose money. This may be suited to any business from consultancies, or graphic designers to telecommunications.
Some industries and the professional bodies which regulate them may insist on having professional indemnity insurance due to the nature of the advice. For example, areas like law, finance, accountancy, or healthcare.
Public and product liability insurance
Public liability insurance is useful if your business function means you interact often with the public and may be liable for any damages. For example, if you own a store and someone slips on wet floors, or if you’re a bricklayer and someone’s car is damaged due to falling debris.
Essentially, if your business includes visiting clients’ premises or is out in public, or clients visit your premises then public liability insurance can help protect you if there are any issues. Restaurants or service industry businesses in particular should have public liability insurance.
Product liability insurance is similarly about protecting any damages or harm caused by your product. For example, if a material in your product unknowingly causes an allergic reaction in a client or if a manufacturing fault causes an injury.
Your public and product liability insurance can be used to pay compensation to the injured party or pay for any legal costs.
Building and contents insurance
If you have an office, shop or any physical space for your business, you may want to consider getting building and contents insurance. If you rent your space, your landlord should have building insurance which protects the building itself, but you are liable for the contents, therefore, you may need to get just contents insurance.
Contents insurance can help protect you in case of theft, damage or accidents such as fire or flooding. It means you won’t be replacing expensive equipment out of pocket should the worst happen.
NB: if you are running your business from home, your home insurance policy may not cover businesses, so you may need two contents insurance plans.
Stock coverage insurance
If your business has a lot of stock, for example, if you’re a store or a manufacturer, stock coverage can be a vital insurance policy. The insurance covers the price of your stock in case there is any damage or theft. Therefore, you are not left stranded if your stock is damaged or missing in any way.
Other considerations for business insurance
There are many other types of insurance which can benefit your small business. It is especially dependent on your industry, so we recommend checking your industry’s regulatory body and their advice.
Secondly, you may consider incorporating your business into a limited liability company, through incorporation your personal assets are legally separate from your company. Therefore, should your business need to make an insurance claim, your personal insurance and credit are left unaffected.