A guide to small business insurance - Understanding the essentials
Comprehensive business insurance should be as much a part of your business as your accountant and your business banking. Without the right insurance in place, you risk losing your business or facing financial difficulty if something goes wrong and you end-up on the wrong end of a claim.
Why do I need small business insurance?
While running your own business can be highly rewarding, there are risks involved too. If a client falls at your premises and claims for compensation, or you’re taken to court for negligence, you could face a bill for thousands of pounds, even if you’re subsequently proven to have done nothing wrong. And if your office gets flooded and you can’t work there for a month, you’d want to claim for interruption to your business. Plus, if you work from home or freelance, bear in mind that your business equipment is unlikely to be covered by your home insurance policy.
Having the right insurance is a legal requirement in some cases and is essential for your peace of mind as it will protect you, your business, your employees and your property.
How much cover do I need?
Insurance is a monthly cost for your business, so it’s important to make sure you’ve got the right amount. Too much cover and you’ll be paying over the odds for something you don’t need; too little and you could have gaps in your cover that would prevent you from being able to claim.
Firstly, it’s important to distinguish between compulsory insurance and what you can tailor to help keep your business protected.
Is business insurance compulsory?
▪ Believe it or not, there are only two types of compulsory insurance by law in the UK(1), as follows:
▪ Employers’ liability insurance: if you employ anyone (including yourself if you run a limited company on your own), this is a legal requirement to protect your business against compensation claims from an employee who is injured or becomes ill as a result of their work. You can be fined up to £2,500 if you don’t have it.
▪ Third party motor insurance: you need to have this as a bare minimum for any vehicles used by your business.
Perhaps unbelievably, you are not obliged by law to insure your home, but if you have a mortgage you can expect lenders to insist that your house is adequately insured.(2)
Other insurances that will help to protect your business
Alongside the compulsory insurance element, you could also consider covering yourself and your business for:
▪ Professional indemnity insurance: protect your business against claims from clients for faults or negligence in your work that causes them to lose money.
▪ Public and product liability insurance: if a member of the public is injured or becomes ill due to something you or your employees do, or a product you make, this will cover the cost of claims against you.
▪ Tax enquiry and legal expenses insurance: legal fees, court cases and compensation can cost thousands of pounds, even if you win the case. This covers those expenses. If you are a contractor, we also offer IR35 contract reviews, please ask for details when calling us.
▪ Buildings and contents insurance/Material damage insurance: protect your physical assets, including your premises, equipment and stock, against theft and damage from flood or fire.
▪ Personal accident and sickness insurance: when your business relies on you, this covers you if you can’t work due to illness or an accident both at work and outside it.
Tailored insurance for your company
No two businesses are the same, even in the same industry. Therefore, as well as choosing from the list of the insurances above, you need to think about your other insurance needs.
If you run a small motor fleet, that would mean new care replacement cover; if you’re a pub owner then it’s coverage for in case you lost your license; and if you’re a property owner then it’s cover for loss of rental income.
For further information about what types of business insurance are available to you and for a competitive quote see our website - www.markeluk.com/business-insurance, or call 0800 640 6600
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