Business Insurance – what do I really need?

Business Insurance Policies

There are so many things to think about when you set up your business that business insurance can fall by the way side.

As a business owner, you have a duty of care to clients, the general public and if you have them, staff.

It might not be glamourous and it’s an initial outlay that you could probably do without, but having the correct insurance policies can ensure financial support if something goes wrong.

But what type of insurance do you need?

The answer to that question depends on the type of business you run, your premises and whether you have employees.

Here are some insurance policies you’ll need to consider.

Professional Indemnity insurance

Although there isn’t a requirement by law to have this, it will protect you for loss of documents, data breaches, defamation and libel.

For example,if you carried out a piece of IT work for a client and lost client data, professional indemnity insurance would cover any claims made against you and the legal costs associated with the claim.

Public liability insurance

If your business interacts with the public, you should consider this insurance cover. For example, you might be a delivery service or you might cut clients hair at your house. Some businesses may want to know you have this insurance before they’ll work with you.

Imagine that you’ve cleaned the floor in your café but you forgot to put out the wet floor sign. If someone falls and injures themselves, they could make a claim against your business. If you have suitable insurance, it would cover legal fees and compensation costs, up to the limit of your policy.

Employers liability insurance

If you’re an employer, then you definitely need to have this insurance. It’s a legal requirement and it will help you pay compensation if an employee is injured or becomes ill because of the work they do for you.

Your policy must cover you for at least £5 million, although it’s best to consider your risks and liabilities to see if you’ll need a higher level of cover.

There is a chance you may not need this insurance if you only employ a family member or someone who is based abroad but make sure before you say no to a policy.

The policy must be arranged with an authorised insurer and you can check if your insurer is reputable by looking on the Financial Conduct Authority register. Failure to put this cover in place could result in a fine of up to £2,500 for every day that you’re not properly insured.

Key person insurance

If you have one or two people in the business who really hold everything together then it could be worth insuring them. It might sound strange but more often than not, the founder of a small business is instrumental to the running of it. Without this person or group of people the business would lose direction and flounder.

The policy is like life insurance and critical illness cover but it’s the business that receives any payout and not the individual.

If a key employee were to die or become ill and unable to work, the policy would pay out and the money could be used to keep the business going in the short-term while a replacement was found.

You would need to ask the individual first before you tried to take a policy out on them though!

Business interruption insurance

This aims to put your business back in the same trading position it was in before any damage or breakdown occurred. This cover is often an optional extra to buildings and contents insurance.

Most policies will cover business interruption as a result of:

• Damage caused to your premises or equipment by fire, storm or flooding
• The breakdown of essential equipment.

Some policies will even cover business interruption as a result of:

• People not being able to get into your business premises
• Damage occurring at the premises of a supplier or customer.

Cyber security business insurance

A recent UK Government survey estimated that two in five micro and small businesses (42 per cent) identified at least one cyber breach or attack in the past 12 months. These attacks can impact profits and reduce consumer confidence.

If you have professional indemnity insurance, there is generally already some cover for data breaches included but you might want to consider cyber security insurance if you:

• Hold sensitive customer details such as names and addresses or banking information
• Rely heavily on IT systems and websites to conduct your business
• Process payment card information as a matter of course.

To recap

• If you’re an employer, you’ll need Employers liability insurance as it’s a legal requirement.
• You should also consider public liability,professional indemnity, cyber and key person insurance. Not a legal requirement but these will give you peace of mind should something go wrong.
• If you have a property as part of your business, such as a warehouse, shop or office, you need to make sure you have buildings and contents insurance

If you’re not sure you need to worry about insurance, consider this.

It can easily be the difference between staying in and going out of business, should a claim be made against you.

There are insurers who specialise in policies for small businesses, so do some research before signing on the dotted line and find the right level of cover for your needs.

Support for your business journey

We love working with businesses and helping them to grow and manage their finances efficiently. So, come and visit us at one of our THP offices located in Chelmsford, Sutton, Saffron Walden and Wanstead.