The essential insurance policies for small businesses
Are you an optimist or a pessimist?
Glass half full or half empty?
Whatever your outlook, it’s important to recognise that sometimes things go wrong.
Insurance is a way to cover ourselves for those eventualities.
It brings peace of mind and limits costs in the event of accidents and incidents.
That’s even more important as a business owner, where the scale you’re operating on is far larger.
Not only do you have yourself to think about, but your employees, the products and services you provide, your factory, warehouse, depot, or shopfront, and the members of the public you interact with.
You can see that there are many more factors at play, and so it pays to be covered.
There are several different types of insurance aimed at small businesses, and they each cover specific eventualities and outcomes.
This article will look at 6 key types of insurance that most small businesses should have in place, and help you understand why they’re important and what they cover.
Public liability insurance
Known as general liability insurance in the US, this covers you and your business against the costs of legal proceedings and compensation from members of the public. This might look like a trip or fall on your premises, or you damage someone else’s property while carrying out your services.
It isn’t typically a legal requirement in the UK, but many clients, particularly if you operate a B2B model, may insist on it before doing business with you. The level of cover you need will depend on the scope of your business and the risks involved, but typical values are between £1m and £10m.
Property insurance
Many businesses with physical presences will have invested heavily in their location, their equipment, and their inventory. If disaster strikes—like fire or theft, property insurance will compensate you for the damages or losses caused.
The value of any policy will depend entirely on the makeup of your business and the value that could be paid out if something goes wrong. Businesses with one small location and minimal stock will require a far lower level of cover that an organisation with multiple factories full of specialist equipment.
Professional indemnity insurance
If your business offers services or advice, there’s a risk that a client could turn around and claim that your involvement cost them money through an error or negligence of some kind. While it is again not a legal requirement, many clients will insist on it, and the unpredictable nature of claims make it a real ‘peace of mind’ one to have in place.
Cyber insurance
This is a more circumstantial form of insurance than many of the others on this list. Cyber insurance will be all but essential for some businesses, where the risk of cyber attacks and data breaches can be significant.
For other businesses that might have more limited online presence or dealings, this may not be as important. It is worth noting however, that cyber crime is a rapidly growing danger for many, with hundreds of thousands of attacks each year costing billions in losses.
Business motor insurance
This is another conditional insurance—only relevant if your business uses vehicles for work purposes. However, unlike cyber insurance, business motor insurance is a legal requirement in the UK if that is the case.
In much the same way as individuals must have insurance to drive their own car, covering injuries or damage caused by vehicles operated for your business is essential if your business demands the same.
Employers’ liability insurance
Finally, but certainly not an afterthought, employer liability insurance is the one essential insurance that all small businesses must legally have in place if they employ any members of staff. That covers any business larger than solopreneurs and sole traders.
This insurance protects your business against compensation claims made if employees get injured in the workplace or sick due to their work. Minimum cover starts at £5m, though many policies go far higher.
Importantly, since this insurance is a legal requirement, businesses can be fined for operating without it. These fines can add up quickly, so it is essential that you have this cover in place if it applies to your business.
If you don’t have all 6 of these policies just yet, don’t panic! Assuming you employ staff, as long as you have employers’ liability insurance, you aren’t in immediate danger. Business motor insurance is also essential if it applies.
Beyond that, these types of insurance offer cover and peace of mind, but a day of not having them isn’t going to land you in hot water. Compare prices online, find a policy that suits your business, and factor its costs into your financial planning.