What Business Insurance Do I Need?

Are you a business owner in the UK? Whether you're a seasoned entrepreneur or just starting your business, one thing remains constant - the importance of business insurance. In this comprehensive guide, we'll delve into the world of business insurance, helping you navigate the complexities and ensure your business is well-protected.

Every small business owner needs some combination of business insurance for financial and legal protection against liability in a crisis.

Yet, with limited resources, it can be tempting to look into cutting costs whenever you can. That could mean deciding to purchase only business insurance that you're legally required to have.

But that's overlooking the fact that an uninsured accident could potentially sink your business.

In an Inc. article, startup founder Leo Welder shared about his decision to skip out on a intellectual-property litigation insurance while he was in the process of purchasing general insurance policies for his business.

This proved to be a costly mistake. When his company was later embroiled in a lawsuit with a publicly traded company, he wound up paying several hundred thousand dollars in legal fees.

Looking back on his experience, his advice for fellow business owners is: "It's not just a matter of 'Can I afford this?' but a question of 'Can I afford not to have this?'"

With many different types of business insurance available, it can be difficult figuring out exactly what you need.

Here's when our guide comes into the picture. Below, we answer FAQs concerning business insurance.

Business insurance, often referred to as commercial insurance, is a safeguard for your business. It offers financial protection in the face of unexpected events or liabilities that could threaten the stability of your company. Business insurance covers a wide range of risks, including property damage, legal claims, and even cyber threats.

Do I Need Business Insurance?

Absolutely. Business insurance is not just an option; it's a necessity for any business operating in the UK. It shields you from unforeseen financial burdens, ensuring your hard-earned assets and reputation remain intact.

‍Business insurance is designed to protect you from the everyday risks associated with running your business.

Your insurance needs are specific to your business. We'll help you understand why you need insurance and what type is best for your business. 

Here are the top five reasons why you might need insurance:

1. You provide a professional service or handle client data

In this case, professional indemnity insurance might be prudent; covering you for claims made against you by a client due to errors in your work that have resulted in a financial loss.

2. It's a requirement imposed by regulatory bodies

This is a basic requirement in order to operate in some professions. For example, solicitors, accountants, and some healthcare professionals are required to have professional indemnity insurance.

3. You interact with third parties

Public liability insurance might be worth considering if you interact with third parties such as customers, clients, suppliers, or other members of the public.

This covers you for claims made against you by one of these third parties. It is particularly important in cases where there is an increased risk of a customer being injured, e.g. a company offering adventure sports. Most retail outlets, food outlets, grooming, construction, and tradespeople take out this insurance.

4. You are an employer

Employer's liability insurance is a legal requirement in the UK for businesses that employee one or more employees.

It is in place to cover workplace injury or damage claims made by a member of staff. Some companies may be exempt, including many businesses that only employ close family members.

To check if your business is exempt, review Health and Safety Executive (HSE) guidelines or seek professional advice.

5. You will be investing in property, equipment or inventory

A retailer may hold a large amount of stock. An architect may invest in technology or equipment. A restaurant would invest in ovens. Whatever the case, an insurance policy that covers contents, buildings or stock makes for a prudent investment.

For small businesses, essential insurance options may include:

• Public Liability Insurance (PL): Protects you from claims related to third-party injuries or property damage.
• Professional Indemnity Insurance (PI): Ideal for service-based businesses, it covers legal expenses in case of professional negligence claims.
• Product Liability Insurance: A must for businesses that manufacture or sell products; it safeguards you against product-related claims.
• Property Insurance for Businesses: This covers physical assets, including buildings, equipment, and inventory.
• Business Interruption Insurance: Helps you recover lost income when your operations are disrupted.
• Invoice Insurance: Protects against unpaid invoices due to insolvency or disputes.
• Legal Protection Insurance: Covers legal expenses, a vital asset if you find yourself in a legal battle.
• Tax Investigation Insurance: Provides coverage for costs incurred during tax audits.
• Cyber Insurance: Crucial in the digital age, it safeguards your business against cyberattacks and data breaches.
• Key Person Insurance: Ensures the financial stability of your business if a key employee becomes incapacitated or passes away.

Selecting the right business insurance for your unique needs and circumstances is a pivotal decision. To ensure you make informed choices, follow these key steps to choose the most suitable insurance coverage for your business:

1. Assess Your Risks: Begin by comprehensively assessing the specific risks your business faces. Consider your industry, the size of your operation, and the nature of your products or services. Identifying these risks is the cornerstone of selecting the right coverage.
2. Legal Requirements: Familiarize yourself with the legal obligations related to insurance in your industry. For example, employers are often required to have employers' liability insurance. Understanding these requirements is essential to remain compliant.
3. Seek Professional Advice: Engaging an insurance advisor or broker is a prudent step. These professionals possess the expertise to match your risks with the appropriate insurance policies. They can also provide insight into available options and cost-effectiveness.
4. Customize Your Coverage: Tailor your insurance to your business's unique profile. Rather than adopting a one-size-fits-all approach, select coverage that aligns precisely with your needs. Customization can help you avoid paying for coverage you don't require while ensuring you're adequately protected.
5. Compare Multiple Insurance Providers: Don't rush into a decision. Obtain and compare quotes from multiple insurance providers. This process allows you to assess not only the cost but also the scope of coverage offered. Keep in mind that the cheapest option isn't always the most comprehensive.
6. Read Policy Terms Carefully: It's imperative to thoroughly read and understand the terms and conditions of your chosen policy. Pay close attention to any exclusions, limitations, and deductibles. Ensure that you're aware of the extent of coverage and what's expected of you in terms of premiums and claims.
7. Consider Bundling: Many insurance providers offer package deals that bundle different types of coverage. Bundling can often lead to cost savings. Assess whether consolidating policies aligns with your needs.

1. Financial Ruin: When unexpected events occur – whether it's a lawsuit, property damage, or a natural disaster – the financial burden can be overwhelming. Without insurance, these expenses often fall squarely on the shoulders of the business owner. This can lead to severe financial strain and, in some cases, bankruptcy.
2. Legal Disputes: Legal disputes are not only costly but also time-consuming. Without insurance, you may find yourself entangled in protracted legal battles, which can have a significant impact on your business's operations, reputation, and finances.
3. Reputation Damage: Businesses thrive on their reputation. A single incident or liability claim can ruin your image, making it challenging to retain existing customers and acquire new ones. The cost of reputation damage is immeasurable.
4. Missed Opportunities: Many contracts and opportunities, especially with larger corporations, require proof of adequate insurance coverage. Operating without it can bar your business from entering lucrative markets or securing valuable contracts.
5. Personal Asset Exposure: In some cases, such as with sole proprietors or partnerships, not having business insurance means your personal assets are on the line. Your home, savings, and personal property could be at risk if you face financial liabilities stemming from your business.
6. Stunted Growth: The fear of facing unexpected financial burdens without insurance may lead to a more cautious business approach. This can hinder your ability to invest in growth and expansion opportunities.
7. Employee Well-being: If your business relies on employees, consider their well-being. Without adequate coverage, you may struggle to compensate employees in the event of an accident or injury at the workplace. This can lead to decreased morale and loyalty among your workforce.
8. Operational Hiccups: Disruptions to your business's normal operations, whether due to unforeseen events or legal issues, can result in lost income and productivity. In turn, this can affect your business's ability to meet customer demands and obligations.

When Do I Need to Have Business Insurance?

Business insurance should be in place from the moment you start trading. Waiting until a problem arises can be too late. Don't wait for a crisis to strike; proactively protect your business by securing insurance from the outset and maintain continuous coverage to guarantee long-term stability.

What are typical business insurance cover amounts?

The amount of business insurance you need depends on your specific business requirements and risk appetite.

It is worth noting that in some cases, you will need a specific type of insurance in place to sign a contract, depending on the situation and company.

The three most popular types of insurance come in the following brackets:

• Public liability insurance - £1 million to £10 million
• Professional indemnity insurance - £50,000 to £2 million
• Employers' liability insurance - £5 million to £10 million

Business insurance is one of those things that no one really likes doing or to think about, but when you need it, you can't imagine what would have happened if you did not have it.

Invest some time to understand what kind of insurance you really need, and use Hiscox, Simply Business or Tapoly to find your policy.

Will subcontractors be covered on my Employers’ Liability Insurance?

Labour-only subcontractors (LOSC) who work under your direction using your equipment are considered to be under your employment. It is a legal requirement that you need to have employers' liability insurance for these subscontractors.

Bona-fide subcontractors (BFSC) are those you hire for their expertise to work under their own direction. These subcontractors use their own equipment, are paid via invoices, set their own hours and work without supervision. They aren't considered as your employees, and as such, are required to provide their own insurance.

Before engaging bona-fide subcontractors, do check that they are licensed and that they, along with their staff have public liability insurance.

Can I get insured if I have not registered my business?

You can get business insurance before registering your business.

When you’re buying your policy, information that your insurer will ask for include your business address, trade type and actual or projected turnover. You may also be asked about your business structure.

Your insurer won't ask about your company registration number (CRN) or other business registration details. As such, you'll be able to buy business insurance while you're in the midst of settling the paperwork you need to set up your company.

Can I get business insurance without a trade license?

Your license details aren't required when you buy business insurance, so you may buy your business insurance before your trade licence has been issued. If you're unsure about whether your business requires a trade licence, you may find out using HMRC's licence finder tool.

Bear in mind that you need to get all the necessary paperwork sorted out, and that you have obtained your trade licence before you begin trading.

That's because abiding by all laws and regulations is part of your agreement with your insurer. If you begin trading without a licence, your policy may be rendered invalid, and any claim you make may be rejected.

Do I need business insurance as a sole trader?

as a sole trader, the need for specific types of insurance depends on the nature of your work. If you operate without employees, you won't require employers' liability insurance, but it's advisable to consider public liability insurance to protect against potential claims from the public or damage to their property resulting from your work. Additionally, professional indemnity insurance is crucial, and it may even be a requirement in your profession to safeguard against claims of professional negligence. If you use a van for your work, having business van insurance is essential to protect both you and your vehicle. Assessing your unique circumstances and risks is key to determining the right insurance coverage for your sole trader business.

Do I need business insurance for an online business?

Indeed, operating an online business doesn't exempt you from the need for business insurance. Depending on the specifics of your online business, several types of insurance can be particularly valuable. If you maintain inventory or stock, business contents insurance is vital to safeguard against potential damage or theft of your stock. Additionally, product liability insurance should be seriously considered, especially if your online business involves producing or selling products. This type of insurance provides protection in cases where your products lead to injury or damage to others or their property, offering you valuable peace of mind.

Do I need business insurance if I work from home?

Whether or not you need business insurance while working from home depends on various factors. If your existing home insurance policies continue to provide adequate coverage when you work from home, you may not require additional business buildings and contents insurance.

Do I need business insurance if I hire employees?

Absolutely, if you hire employees for your business, employers' liability insurance is legally required as it provides protection at the time when your employees are injured, fall ill, or suffer fatalities while performing their job. It covers the expenses associated with compensating your employees and the legal costs related to any claims. Failure to have employers' liability insurance can result in substantial fines, which can amount to £2,500 per day. So, not only is it a legal obligation, but it's also a vital safety net for both you and your employees.

Which types of business insurance are mandatory?

Employers' liability insurance is legally required for most businesses with employees.

How much does business insurance cost?

The cost of business insurance varies based on factors like your industry, location, business size, and the type and amount of coverage you need. To get an accurate estimate, request quotes from insurance providers and consider working with an insurance advisor.

How can you make a business insurance claim?

To file a business insurance claim, promptly inform your insurer, complete the required forms, submit supporting documents, cooperate in investigations, and await claim approval and payment.

Can an insurance adviser help me sort out small business insurance?

Yes, consulting an insurance adviser can simplify the process, ensuring you get the right coverage for your business. You can also consult with an experienced accountant to make sure your finances are optimized.

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Now that you've gained a comprehensive understanding of business insurance in the UK, it's time to take action. Don't leave your business exposed to risks; checkout our Google and Trustpilot reviews to see how satisfied our clients are with out services. Take the next step and protect your business by hiring small business accountants from GoForma. Our experts will guide you through the process of securing the right insurance for your business. Your peace of mind is just a click away.

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