A beginner’s guide to business insurance

Friday, 20 January 2017
Taking out business insurance is not just a matter of calling up an insurance company and requesting “one business insurance policy, please” – there are many different types available, and you will likely require more than one, depending on what kind of business you are looking to set up. Some of these insurance policies are even mandatory, so it’s important to do your research before you take the leap. Insurance may seem like just a small part of setting up a business, but if done right it will keep you out of court while potentially saving you a lot of money.

Mandatory insurance

Unless you are planning to employ only close family members (and will be for instance publicly financed), it’s mandatory to take out an employers’ liability insurance policy. This will prevent you from getting sued and having to pay compensation claims out of your own pocket, should anything unfortunate (i.e. an injury or medical condition caused by working conditions) happen to any of your employees during the course of their work.

Everyone who owns a car in the UK is mandated to have some form of vehicle insurance, and businesses are by no means exempt. So, if you are starting a business that involves the use of commercial vehicles, don’t forget to insure them for that purpose.

Highly recommended insurance

With only two types of insurance being mandatory, you may be thinking you’re coming off lightly, but there are many other types of insurance which should be considered. After all, not being insured is likely to be far more costly in the long run.

Do you have home insurance, to cover the cost of any damage or burglary? Then why wouldn’t you have commercial property insurance as well? After all, it would be a lot more costly to cover both the cost of repairs (and in the case of burglary also replacements) and the loss of work hours if you don’t have the right policy in place. Of course, if you are renting your premises you would only need business contents insurance, and if you’re working from home you might be covered by your home insurance policy or only need office insurance. These policies exist so that you don’t end up sitting in an empty office with nothing to do and large bills to pay should the worst happen. And if you want even more cover against the cost of interruptions to work, there’s a separate policy for that as well.

If you’re planning to start a business that deals directly with the public, then you’re going to need a public liability insurance policy to cover you against any claims made by members of the public who may have suffered an accident on your premises. This is not only important for shopkeepers, but also for construction work, even if you have big fences around the site warding people off. Any incident that injures a person or property not belonging to the business should be covered under such a policy, so check how much interaction your business and its people will have with the outside world and weigh the risks.

If you are a highly trained professional (such as an architect, doctor or lawyer) looking to start your own business, consider taking out professional indemnity insurance. This will cover you should you be sued for professional negligence, loss of data or unintended breaches of contract – if somebody feels that your services caused them some form of loss or injury, this policy will ensure that you won’t have to pay for the legal fees and you will have someone in your corner who will fight to protect your business and your professional accreditation.

There are many other types of insurance, such as directors and officers liability insurance, which specifically covers upper management against lawsuits, or stock/equipment cover, which protects the heart of any business built around its stock or certain specialised equipment. It’s important to consider all risks and liabilities to your business, and to contemplate cover for at least the main hazards.

Find what works for you

Any prudent new business owner will be looking to cut costs wherever possible, to ensure that the business can stay afloat through the uncertain start-up period, but it might still be worth talking to an insurance company and seeing exactly what kind of cover you will need. A specialised, tailored policy could save you money (and hassle) when compared with taking out separate policies from multiple companies. Just make sure to do your research beforehand, so you can be sure that the company you are asking is reputable and that the quote they offer you is competitive.

Another way to cut down on the cost of insurance is to make sure you won’t need to claim, by having safety plans in place, training your staff appropriately, and ensuring adequate security. Being able to show you’ve thought about the risks can help convince an insurance company to offer you a more reasonable premium.

Regardless of whether you are planning to become a one-man-in-a-van plumbing operation, or are building the foundations for the next big thing in tech/finance/retail, insurance is an important part of any business from day one, and should be part of any company’s constantly evolving risk assessment plan. Are you covered?