Along with finding funding and dealing with legal and tax-related paperwork, buying your business insurance is likely to be one of the first things you do when you set up your business.
Although the process of buying business insurance is pretty simple, understanding the types of cover available and what your business needs can be trickier.
We’ll take you through some of the key types of business insurance and give you some top tips for getting the right cover in place.
What type of business insurance do I need?
The business insurance you need depends on the type of work your business does and the range of risks you face. To choose your insurance, think through the work you carry out and the things that could go wrong.
If you give professional advice, for example, you could face a compensation claim from a client who believes you gave bad advice. If you’re a tradesperson, you may face a compensation claim for injury to a member of the public. If you have valuable stock, you may want to cover it in case it gets damaged. And if you have important equipment, you may decide that this should be insured too.
Professional indemnity insurance
Professional indemnity insurance is a key insurance cover for any business which offers professional advice. It’s also important for any business that deals with client data or intellectual property (IP). As a result, it’s an important insurance for businesses like architects, accountants and designers.
This insurance can pay out if a client sues you for a mistake they believe you’ve made in your work that causes them to suffer a financial loss. For example, if you produce design work for a client that infringes someone else’s copyright, or if you make a mistake in an architectural plan that means building work needs to be redone.
Public liability insurance
Public liability insurance is likely to be important to your business if it comes into contact with members of the public, for example if customers or clients visit your business premises. It can cover compensation claims made by a member of the public for injury or damage they suffer as a result of your business.
As you’d expect, it’s a key cover for tradespeople, shops, restaurants and hairdressers. This insurance could pay a claim made by a supplier who trips over a wire while making a delivery to your business premises, for example, or a passerby was injured by falling debris from your building project.
Employers’ liability insurance
Unlike other types of business insurance, employers’ liability insurance is mandated by law. Apart from a few exemptions, businesses that employ staff are legally required to have employers’ liability insurance. If you need this insurance and you don’t have it in place, you could face a fine of up to £2,500 per day.
This insurance can cover compensation claims made against you by a member of staff for illness or injury that they suffer as a result of their work. For example, if a tradesman you employed was injured on site, or if an office worker suffered from repetitive strain injury (RSI).
Business buildings, contents and stock insurance
You can also opt to cover your business premises in case they’re damaged or destroyed by something like fire, flood or theft. Business buildings insurance covers the building itself, while contents insurance can cover your business equipment and furniture, and stock insurance covers the items that you sell. You can usually choose to buy just one of these covers, or to buy them together as part of a package.
Other types of business insurance
There are many other types of business insurance available too, including business interruption insurance, product liability insurance, tools insurance, and business legal protection insurance. It’s important that you think carefully about the risks you need to cover and choose the right insurance for your business.
Business insurance checklist
- Check whether your trade or regulatory body requires you to hold a particular type of insurance. It may also specify a particular cover level
- When you take on a new client, make sure you comply with any supplier insurance requirements set out in the contract
- If you have a business premises, see if your lease requires you to take out business buildings insurance
- Try to get a tailored business insurance package by choosing an insurer that offers all the cover types you need in one policy
- Using a broker like Simply Business can save you save time by allowing you to compare a range of quotes in one place
- When you’re buying your insurance, give accurate information about your business to make sure you’re fully covered if you come to make a claim
- Once you’ve bought your insurance, read your policy documents carefully so you understand the requirements and restrictions and you know how to make a claim
- If anything changes with your business — for example, you take on a new kind of work or you hire your first employee — tell your insurer straight away so they can update your policy if necessary