At Heath Crawford, we help ensure peace of mind for business owners in many industries around the UK. However, because business insurance is such a broad term it can prove to be a source of unnecessary confusion for some. There are so many different types of business insurance – all of which cover a certain area or eventuality – that it is difficult to know which ones are directly relevant to the company that you run. Because most forms of business insurance are not mandatory, making this decision means understanding what types of issues are likely to affect your business in the future and what areas of your business could be particularly vulnerable.
What is business insurance?
Business insurance refers to any type of insurance that covers financial losses which could be incurred in the normal course of business. This means that extraordinary circumstances, such as the financial difficulties presented to so many businesses by the Covid-19 pandemic, are not often covered by standard business insurance policies. However, no two businesses are the same, and therefore business insurance can mean different things to different companies.
What types of business insurance are mandatory in the UK?
You will often hear business insurance referred to as a legal requirement. However, while companies in certain industries may be legally required to take out insurance specific to their area of business, there is only one type of business insurance which is mandatory for virtually all businesses in the UK. This is employer’s liability insurance.
Employer’s liability insurance is a requirement for any company which employs staff (although companies such as those which only employ close family members may occasionally be exempt, as detailed in the HSE guidelines). It covers compensation claims made by staff in the event that they sustain an injury or become ill as a result of their work.
If your company is required to have employer’s liability insurance, this must legally cover up to at least £5 million, and the standard limit provided by all insurers is £10 million. You could be fined £2,500 per day for not having insurance.
What types of business insurance do I need?
There are many more types of business insurance which are not legal requirements. However, we strongly recommend that you consider every option carefully and assess whether it applies to your business. Think about losses or damage that could be sustained, and any claims which could be made against your business, and take out a policy if you believe that it could be at all relevant.
Public liability insurance
Any company which comes into contact with members of the public should take out public liability insurance. This includes interactions both on a business premises and elsewhere – meaning that not only do bricks-and-mortar businesses such as shops, restaurants and beauty salons need it, but it is also relevant to field-based businesses like builders and tradespeople.
It covers businesses against compensation claims made by customers, clients and other third parties. Contracts with clients may state that a certain level of public liability insurance is needed, so this should always be checked.
Product liability insurance
If your business manufactures or provides products of any sort, you should take out this insurance in order to be protected against claims arising from injury caused by a faulty or defective product. You do not have to have manufactured the product in order to be liable.
Business buildings insurance
If you are the owner of the premises your business operates in, even if it is run from a residential property, you should take out business buildings insurance which covers eventualities such as theft or fire damage. If you rent or lease the property in which your business operates, you should check to see whether the landlord or freeholder has an adequate insurance policy.
Home business insurance
This specifically covers business activities and interactions with customers which take place in your home, meaning that if somebody is injured in your home in the course of business, you are covered. It also protects any belongings of your business which are stored in your home.
Business contents insurance
If considering business buildings insurance, it is also worth thinking about business contents insurance. This covers specific items within the building in question, such as equipment or tools, in the event that they are stolen or damaged.
Business interruption insurance
Business interruption insurance can cover loss of revenue, gross profit or increased costs of working incurred by named perils such as theft, flooding, fire, lightning strikes or equipment failures, allowing the company to continue functioning in such events. Some policies also include denial of access cover, which relates to events such as the closure of an area by insured peril such as a fire.
Business legal protection insurance
Also known as business legal expenses insurance, this covers both commercial legal costs and the potential legal costs that could result from a case being brought against your business.
This covers the cost of replacing any stock belonging to your company, whether it is held on business premises or in a storage facility, in the event that it is stolen, lost or damaged. This can also extend to stock or goods that you may hold on behalf of your customers.
Personal accident insurance
Personal accident insurance is a way for businesses to help support employees and their families. It covers serious injury or death resulting from an accident, and can cover loss of income and medical costs.
This covers businesses which offer advice or consultancy services to other businesses, in the event that a client loses money on the basis of your advice or actions and sues your business. Certain companies such as surveyors and architects are required to have it.
In response to an ever-increasing online threat, it may be worth considering this type of insurance which covers you in the event that a cyber attack compromises the security of your business, resulting in you having to notify the ICO of the breach. Cover will also extend to notify all of your affected clients and provide ongoing credit monitoring.
An extension to this covers a type of cyber crime where you inadvertently pay an invoice which has been sent by a fraudster and you pay the incorrect account, commonly known as Social Engineering Fraud.
What types of insurance do I need to start a business?
As with any existing business, if you are starting a new business you should take a close look at the list above and consider carefully which types you will need.
It is important to consider both your current circumstances and your future plans for the business. For example, you do not need employer’s liability insurance until you hire staff, but if you plan to do so in the near future then you should consider it now.
What types of insurance does a small business need?
Your business insurance requirements do not depend upon the size of your business but upon the manner in which it operates. An SME may need many of the same types of insurance as a major corporation – but certain forms of insurance, such as home business insurance, are more likely than others to be needed by small businesses.
For your small business, you should closely examine the list above and select accordingly, taking out any insurance policies which you feel are relevant to the way you do business.
Ask us about business insurance
At Heath Crawford we are happy to assist with your business insurance enquiries, and provide any information or clarification that you may need around new or existing policies.