Small Business Insurance – Understanding the essentials
Insurance should be considered an essential requirement for your business ‒ much like you need premises to work from and products to sell, you also need insurance to protect your company from certain incidents and risks.
Small business insurance is exactly the way to do this, and covers you against unexpected losses that can, in some cases, cause financial difficulty or be detrimental enough to close your business altogether. When you have the right type and level of cover, this can be prevented to keep your business running smoothly and successfully.
Why should I get small business insurance?
While running your own business can be highly rewarding, there are risks involved too, and each risk has the potential to result in financial loss. For example, if a client or member of the public falls or slips while on your premises and 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.
Then there’s the risk of physical damage too, such as flooding, which can result in an unsafe and unsuitable working environment. In this instance, you would likely need to claim on your business interruption insurance.
Even when you work from home, you must bear in mind that business equipment is unlikely to be covered by your personal home insurance policy. If it’s damaged or stolen, your insurance may cover the cost of the equipment, so you don’t need to pay out for it yourself.
In some cases, holding insurance is a legal requirement. This is particularly the case for employers’ liability insurance and third-party vehicle insurance (if you have a business vehicle).
What insurance does a small business need?
The type of insurance your small business needs depends on what you sell or provide, as well as a range of other factors, including the size of the business, whether you’re a sole trader or limited company and the number of employees you have.
Alongside the compulsory insurances, like employers’ liability, there are several other types of insurance that you may or may not need.
Professional indemnity insurance
If you provide your service or advice to other businesses, you should consider professional indemnity insurance. This will protect your business against claims from clients that result in a monetary loss. For example, if you make a mistake or provide poor advice that causes your client to lose money, your insurance should cover any legal fees, court proceedings and solicitors’ costs.
Public liability insurance
If you work with members of the public, carry out work at a clients’ premises, work in events or have visitors coming to your own premises, you should consider public liability insurance. This will cover the cost involved with any claims made against you should a member of the public become injured on site, or fall ill because of a product you make.
When you provide or supply physical goods, you should have product liability insurance. This isn’t a legal requirement, but can be important to have in case a product you sell or create injures a person or damages their property.
Buildings and contents insurance
If your business has its own premises, you supply physical products or have business equipment on-site, including laptops, printers and other hardware, you might want to consider buildings and contents insurance. This should be different to the insurance you have on your home and your personal belongings. Buildings and content could cover the cost of any physical assets if there were to be a fire or flood in the building or if anything was stolen.
Personal accident and sickness insurance
When you’re relied upon heavily for the day-to-day running of the business, you may lose out on earning money if for some reason you can’t work. If you find yourself unable to work due to illness or an accident (both at work or outside the premises), personal accident and sickness insurance can cover you and provide you with peace of mind. You can rest easy knowing that you’ll still earn a salary, even when you can’t work.
Tax enquiry and legal expenses insurance
Tax enquiry and legal expenses insurance can be taken out in case you become involved in a legal dispute or require specialist solicitors. This insurance can cover legal fees and court costs, and even compensation should it need to be paid out.
Cyber crime insurance
If you have and store lots of data and/or process payments online, you may consider taking out cyber crime cover. Hackers can gain access to your customers’ data and this would be considered a data breach. They can do this through fake emails, for example, that allows them access to your documents when a link is clicked.
Cyber insurance can cover loss of business income from cyber activities, the costs to replace equipment (like computer systems), and fines that you may need to pay for data breaches. Our cyber crime insurance also provides PR advice to help with reputation management if you are victim of a cyber-attack. It also provides you with exclusive access to an IT team who can spot and fix any cyber issues you might have to prevent future incidents.
You can learn more about each type of business insurance and all that they cover on our insurance product pages. Using our online quote engine you can get an idea of how much each type of insurance will cost for your area of business.
How much insurance do I need for my small business?
The amount of insurance each business needs is very individual. What’s right for one small business might not be right for you. First of all, ensure you have the insurance that is legally required. For example, if you have employees, make sure you’re covered with employers’ liability insurance, or if you work with a client who requests you have public liability insurance, make sure you get this.
Then, consider your likely risks. Professional indemnity and public liability insurance tend to be the most popular types of insurance purchased by small businesses. Make sure you read up on each type of insurance to understand whether the risks it covers are risks you could potentially experience.
For example, if you have a shop that members of the public are walking in and out of, public liability insurance could be a good fit for you. If you don’t have any employees and don’t handle client data electronically or process your accounting online, then employers’ liability insurance and cyber crime insurance likely won’t be applicable to you.
Once you’ve decided on the types of insurance you would like to protect your business with, it’s important to make sure you have the right level of cover for your individual business needs. With too little cover, you could have gaps that may prevent you from being able to claim (or, if you do claim, you may not be covered for the full amount). If you have too much cover, you’ll likely be paying more than you need to for policies you don’t need.
To work out the level of cover you need, think about the amount of money you would need to cover certain incidents. For instance, how much would it cost to replace all your stock if it were to be damaged or destroyed? This figure is how much cover you would need with contents insurance.
Employers’ liability insurance: if you employ anyone (including yourself if you run a limited company on your own), it 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 every day you are not properly insured with employers’ liability insurance.
Third party motor insurance: you need to have this as a bare minimum for any vehicles used by your business.
How to get small business insurance
To find out how you can protect your business with Caunce O’Hara, get a quote now or for more advice, call us on 0333 321 1403 and speak to our friendly advisers.
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