Guide to deciding the right level of business insurance

Business insurance is critical for any start up, sole trader, SMB or fully established enterprise organisation. Having the correct business insurance in place to cover your needs however can be a bit of a minefield without the specialist knowledge of a broker.

We have put together some key questions that can help you establish which elements are legally required and which are relevant to your business and the type of work you undertake.

Which parts of business insurance are a legal requirement?

If you employ staff and aren’t publicly funded, or as the owner and sole employee have 50% or more of the share capital, then you are legally required to have a minimum level of Employer’s liability cover at £5million. Employer’s liability insurance is legally enforced by HSE.

Do customers visit your premises?

Public liability insurance protects you in the event that a member of the public is injured, or their property is damaged as a result of your business actions. If people visit your premises then you’ll need to be covered for this or else risk leaving yourself open to a huge compensation claim.

Do you offer expert advice or services to clients?

By offering advice or services you are opening yourself up to a whole field of possible errors. Professional Indemnity can protect you from a wide range of situations, including libel and slander. Depending on which field you work in your clients may even require that you have this insurance in place.

If you aren’t working or retired, do you still need professional indemnity insurance?

Yes, you do. Professional indemnity insurance works on a ‘claims made’ basis. This means you’ll only be covered if you have insurance when you do the work AND when the claim is made (which may even be some years down the line). This is where ‘run-off insurance’ is required.

Does your company employ directors or are you yourself a director?

Director’s and Officer’s liability insurance (D&O insurance) provides financial support and defence against potential investigations into the behaviour of directors and the possibility of being sued. Falsely assuming a smaller company is less likely to come under such problems is a naïve approach as company size has no bearing on the potential for investigations into a director’s or officer’s behaviour. Even when not guilty, proving your innocence can be highly expensive and damning to your character without access to the best possible representation for you.

Can the director of a closed limited company still be sued?

Yes, the claim against the company would be closed, but a claim can still be made against the director themselves. Here Director and Officer’s liability insurance is important.

Do you work from home or have an online business?

Your home insurance policy will not cover your business if you work from home. Commercial activity or business assets will remain uncovered without home business insurance. If you operate as an online business and have physical stock and send products to customers, but they don’t visit you then you’ll need online retailer insurance.

Do you have a business premises?

Business buildings and business contents insurance will be required if you operate from a business premises. The value of your business contents is likely to be substantial with many assets which are crucial to the day-to-day running of your business.

If you suffered disaster could you carry on business as normal?

If your income would be affected following a natural disaster then you should consider Business Interruption Insurance. A gap in trading, or additional expenses required to get you back to normal business could be enough to send you under. As many as 40% of businesses fail to re-open following disaster for this reason exactly. Business interruption insurance can cover you for loss of income, utility bills, moving to a temporary location, and hiring of replacement staff.

Does your business deal with customer data or online transactions?

With increased dependence on IT systems, Cyber-crime is a prominent and ever-growing issue affecting many businesses today. With Cyber insurance cover in place you can be protected from first party and third party claims relating to damage to or loss of information from IT systems and networks.

Do you work in a particular trade?

Tradesmen are groups of skilled workers, such as builders, electricians, plumbers, carpenters, roofers, and gardeners. Within your field there are different obligations to third parties, tools and machinery, to be taken into consideration. Tradesman insurance provides cover specific to your trade and the risks involved in your business.

Do you work in the construction industry?

Contract works insurance or contractors all risk insurance covers you against an insurable event that will stop you from fulfilling your contract before it is complete and handed over to the customer. It provides cover for work that is in progress so that you don’t lose out financially should anything happen to an on-going build. For example, a fire or theft part way through building works that otherwise uninsured may halt the completion of the project.

Are you constructing buildings close to neighbouring properties?

When undertaking building developments or refurbishments, the Contractors All Risk Insurance unfortunately doesn’t cover you for any possible damage to neighbouring property. And where negligence cannot be proven, any damage or injury to third parties will not be covered by the Contractor’s Public Liability Insurance. In this scenario you need JCT Insurance to avoid being sued for possible subsidence or damage to neighbouring property as a result of your building works.

Do you use tools for your job?

As a tradesman you will know that the right tools are essential to the job. With tradesman vans being broken into on average every 23 minutes in the UK, tool insurance is critical. A policy that costs just a few pounds per month could make the difference between your business surviving a break-in or going under.

Now we have hopefully given you a better understanding of the business insurance elements available and what you may need, give us a call or complete our enquiry form and our specialist advisors can work through the intricacies of exactly what you require. Unfortunately, one size doesn’t fit all and we’re here to help measure you up precisely.