Business Insurance Guide

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As a business owner it is sometimes difficult to know what insurance you need and how much of it to buy, so we've put together a guide to help you.

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The type of insurance policy you buy may differ depending on the size and type of business you are running, your insurance budget and whether any of your customers have requirements about what insurance cover you should have.

To help you understand what’s on offer we’ve summarised a few key areas of cover:

Public liability insurance

Public liability Insurance protects you against claims for compensation from people outside your business who have suffered an injury or whose property has been damaged because of your business. This could be something as simple as a visitor to your business tripping on a loose rug at your office, resulting in damaged knee ligaments and a claim for compensation.

It can also cover more serious claims resulting from construction accidents which cause serious damage to a building or injuries to a member of the public. Public liability cover will pay for the compensation and legal costs arising from accidents like this.

If you come into contact with members of the public – including your customers – either at their premises or yours you should think about getting a public liability insurance quote.

Employers' liability insurance

If you have employees, even part-time or on a short-term basis, you must buy employers' liability insurance – if you don’t you are breaking the law. The cover protects you if an employee is injured or becomes ill because of their work. They may seek compensation from you and, depending on the type of injury or illness, payments can be very large. Employers' liability cover will pay for this compensation as well as the legal costs of defending the claim.

If you are an employer make sure that you stay within the law and buy employers' liability cover.

Property insurance

Most businesses would find it difficult to work without the tools of their trade or with no access to their place of work – whether you’re a consultancy business and rely on your IT equipment or a plumber who couldn’t work without their tools.

Could you afford to replace all of your business equipment or stock in the event of it being destroyed, lost or stolen? If the answer is no you should consider property insurance to protect your business building and assets.

When buying this cover, it is important to ensure that the sum insured on your contents list is equal to or greater than the value of your equipment; not just the items you think are important (so don’t forget about the boring stuff like office chairs and filing cabinets). If you under-insure it’s unlikely that you would get the full value of any items you claim for.

This also applies to your own or hired-in plant if you work in the construction industry – could you afford to replace it if you didn’t have business insurance? If you do buy cover make sure you insure the plant to its full value.

If you own the building you work from you should make sure that it is properly protected. It’s probably one of your major assets so you’ll need to be confident you won’t suffer financially in the event of a flood, fire or other event which damages your property.

Another cover to consider is business interruption insurance. This will make up for the money you lose if you can’t work because your property has been destroyed, stolen or damaged.

Professional indemnity

Professionals are effectively selling their knowledge and expertise to their customers – you may be doing this in a number of different ways including providing advisory and consultancy services and producing designs.

If your client loses money because of a mistake you’ve made or because your work is late or not up to scratch, you may be faced with a claim for compensation. You might feel you have done nothing wrong but still be faced with significant legal costs to defend the claim.

Professional indemnity insurance can protect your business by paying for this compensation and legal costs.

What else do I need to know about business insurance?

You may feel confident that you know what insurance to buy but not how much. Your first thought should be whether any of your contracts stipulate how much business insurance cover you should buy – they will often require you to have a minimum level of public liability or professional indemnity insurance. If they do then this should be your starting point – although you may decide that you need more cover than the contract asks for.

For public liability and professional indemnity you will need to choose a limit of cover which is right for your business. Think about the type of work you do and what could go wrong in a worst case scenario – how much might it cost, especially if a dispute went to court. Buy a level of cover which you are confident will cover the cost of compensation you might have to pay.

Employer’s liability insurance is required by law if you have employees and you must purchase a minimum of £5 million in cover – although many policies will automatically cover you for £10 million.

When buying property insurance the most important thing is to make sure you are not under-insured.  Be sure to calculate the total value of all the entirety of your property – you can’t pick and choose what you want to be covered.

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