A complete guide to business insurance

By Joe Francis Updated 28th Oct 2019

Taking out insurance on various assets, services and other purchases or outcomes is a standard part of life. We take out insurance to protect our money and assets, whether it's a home or a holiday. If you run a business, you should also be thinking about insurance to protect yourself and your business. Business insurance can protect you in a variety of ways, from helping you if you make a mistake that causes monetary damage to someone else to protecting your company if an employee is injured while working for you.

Some types of insurance are legally required, and being insured will often protect both your financial interests and other people too, such as your employees and customers. If you are self-employed or run a business, you should make sure that you understand business insurance and how it applies to you.

What is a business insurance?

Business insurance is designed to protect businesses from losses that they could suffer when carrying out their activities. In particular, business insurance can often protect a business when they face a claim for compensation from a customer, employer or anyone else they work with. Business insurance can protect your business if you or your employees make a mistake, an accident occurs, there is a theft or criminal damage in your business, or you have to pay legal fees.

Business insurance is often available in package policies, which allow you to pick and choose what types of business insurance you need. You can add together the types of insurance that you require in one policy, making it easy to manage the different types of business insurance that you need. It can also help you to save money by bundling the insurance cover that you require, instead of taking out individual policies.

Do I need business insurance?

Whether you need business insurance depends on a few factors. There are some types of business insurance that are a legal requirement, while others a completely optional, although they might be a good idea.

If you have employees, you will usually be required by law to have employers' liability insurance. This protects you and your employees if they are ever hurt while carrying out their job. Some other types of insurance, such as professional indemnity insurance, might not be directly required by law, but they might be required by certain regulatory bodies. For example, solicitors, accountants and some types of health professionals are required to have insurance to be approved by their respective regulatory bodies. In some cases, you might be expected to have a certain type of business insurance before being able to sign contracts.

Although you might not be required to have business insurance, it's still a good idea to think about having it. It can provide protection to you while you're running your business and ensure that you won't be in a sticky situation if anything happens. It could save you a lot of money should you ever need to make a claim.

What types of business insurance are there?

There are various types of business insurance that you should consider if you run a business. Some of them can protect you if you are found to be negligent in some way or if you make a mistake, while other types of insurance will protect your business premises or assets from theft and damage.

Employers' liability insurance

Employers' liability insurance is the only type of business insurance that is legally required. It is necessary for most businesses that employ staff to have this type of insurance. It is there to cover any compensation claims that an employee might make because of any injury, illness or damage that they have suffered as a result of their work. Some companies might not have to have this insurance, including employers that only employ close family members. The Health and Safety Executive (HSE) can tell you more about whether you might be exempt.

Public liability insurance

Does your business come in contact with members of the public, such as when selling them products or services? Public liability insurance is a good idea in this situation because it can protect you from compensation claims from customers or clients, as well as suppliers or other third parties that you might work with. This type of insurance is common for shops, restaurants, builders and other public-facing businesses.

Professional indemnity insurance

When you offer advice or professional services to other businesses, professional indemnity insurance can help to protect you. This type of insurance is intended to help you out if you ever face a lawsuit when your client loses money and they say that it is due to your mistake. The insurance could cover your legal costs, as well as the cost of any compensation that you have to pay. Professional indemnity insurance is required by some regulatory bodies for professionals such as solicitors or accountants.

Buildings insurance

Just like home insurance, business buildings insurance protects your property. You can take out business buildings insurance if you have separate business premises and also if you work from home and need to protect the area of your home where you carry out your business. It will protect your property from a range of problems, ranging from break-ins to damage from the weather. If you rent your premises, you should check with your landlord to see what insurance they already have.

Contents insurance

While business buildings insurance protects the structure of your business premises, buildings contents insurance protects what's inside of it. It can cover your tools and equipment, as well as other items that you use for your business. Whether something gets stolen, is lost or is damaged in some way, you might be able to make a claim for the cost of it.

Stock insurance

Many businesses hold stock of the products that they sell. If this is the case for you, you might want to have specific stock insurance to protect it. It could be helpful if, for example, some of your stock was stolen or perhaps it was destroyed in a fire or flood.

Product liability insurance

What would happen if the products that you sell caused damage to a customer or someone else? Product liability is designed to protect your business in this situation. You could be liable for damage even if you don't manufacture the product and only sell it. Product liability insurance could pay for legal fees, compensation or other associated costs.

Personal accident insurance

Personal accident insurance is useful for many people who run a business, although some people might find it more necessary than others. It can pay out if you are injured or even if you die while carrying out your work. This means it could be useful for people like builders, drivers, tradespeople and anything else where there could be a higher risk of accident or injury.

Business interruption insurance

Some things can disrupt your business so that you are unable to continue trading as normal. This could include problems like flooding or fire, for example. When this happens, it can be useful to have business interruption insurance. This type of insurance could help to cover your losses. However, it could require other types of insurance to work properly. For example, it might help if you lose revenue due to some of your equipment being destroyed, but only if the equipment is also insured.

Business legal protection insurance

The expense of many things that can happen to your business often lies in legal fees. They can quickly become very expensive if you want adequate legal protection. Business legal protection insurance can cover your legal costs and protect you against the expense of your business facing legal action.

Why is business insurance important?

Business insurance is important if you want to protect your business. You never know what could happen in the future, and there are various things that can go wrong and leave your business facing huge costs. You could experience the negative effects of adverse weather or perhaps a fire. Your business could be hit by theft or other criminal activity, such as vandalism. Or you could find your business facing a lawsuit from a client, customer, supplier, employee or various others you work with.

You might think that business insurance is just another unnecessary expense and that you can risk going without it. However, as soon as something happens that your business can't afford, it could be the end of your company. You don't want one accident or mistake to start a terrible chain of events. Unless you can afford to take care of any problems that arise yourself, you should have business insurance to protect your company.

Of course, you should definitely have business insurance if it is legally required or required by a professional body. Make sure you know if you need to have employers' liability insurance or professional indemnity insurance.

How much is business insurance for small businesses?

Small businesses might worry about the cost of business insurance. When you're trying to keep your costs low, you don't want to pay too much for essential products and services. Fortunately, business insurance doesn't have to break the bank for a small business. It can be affordable, and it could save your business a lot of money down the line.

There are various factors that could affect how much you pay for business insurance. To start with, the types of insurance that you need will make a difference. The more coverage you're looking for, the more you're likely to pay. However, you might be able to save money by rolling different types of insurance into one policy.

The price that you pay will also depend on how much cover you want from each type of insurance. If you want a higher amount of coverage, you will be paying a higher premium for your insurance. The amount of risk your business faces also affects the insurance prices available to you. If an insurance company thinks that your business has a high chance of being sued by a member of the public, they are likely to charge you more.

Of course, these factors mean that you can also find ways to save if necessary. However, you should balance what you pay with how the insurance policy might be able to help you save in the future.

FAQs

Employers' liability insurance is legally required for most businesses with staff, although some are exempt. Some professionals are required to have professional indemnity insurance to be certified by the relevant regulatory body. However, business insurance is often not compulsory for many businesses.

How much business insurance your company needs depends on a broad variety of factors. Every business is different, and has to take certain risks into account. It can help to speak to an insurance broker or expert about how much insurance is appropriate for you.

Your business doesn't need to be registered for you to get business insurance, and you don't need to be trading yet. You can buy the insurance that you need so that you're protected for when your business is registered and ready to trade.

The type of insurance that you need for your business depends on what type of activities you carry out, the size of your business, whether you have any employees, if you deal with the public, whether you have business premises, and various other factors. Speak to an insurance expert to find out which types are most applicable to your situation.

Business insurance can be useful for people who work from home, but it depends on what type of work you do and how you do it.

If you're a sole trader, business insurance can be useful and sometimes even necessary. If you're an accountant, for example, you should have professional indemnity insurance.