Small businesses are the heartbeat of the UK economy. They are built on innovation, passion and commitment. They support millions of business owners and employees and for many they are more than a job, they are a way of life. Business insurance is an important safeguard for small businesses, their owners, their employees, and all those with whom they come into contact.
Here we look at some of the key insurances to consider and the protection they provide.
Business insurance required by law
As an employer you are responsible for the health and safety of your employees when they are at work. If an employee suffers an accident, injury or illness as a result of working for your business, then you could be liable.
Employers’ liability insurance is there to help cover the cost of defending and settling claims from past and present employees who believe you failed in your duty of care to look after them.
If your business is located in the UK and has at least one employee, then it is likely employers’ liability insurance is a legal requirement, although there a limited number of exceptions.
If you are not exempt, the law says you must have employers’ liability cover of at least £5m. Many policies offer a cover limit of £10m as standard.
Businesses that do not have the required employers’ liability cover could face fines of up to £2,500 for each day they do not have the insurance in place.
If your business owns or uses motor vehicles, the other mandatory cover you will need is motor insurance.
As a minimum, you must have third-party motor insurance. This covers claims made against you by someone who is injured, or whose property is damaged, as a result of an accident caused by one of your vehicles.
The law says the motor insurance cover in place should be unlimited for personal injury and at least £1m for property damage.
Additional covers for compensation claims and legal action
In addition to potential claims against you from employees, your business may face claims from customers or members the public, if they are injured or their property is damaged as a result of your work.
In this event, public liability insurance helps towards the resulting compensation and legal costs.
You may also want to consider professional indemnity insurance if your business gives professional advice. If a customer claims your advice damaged their reputation or resulted in financial loss, you may be liable.
Professional indemnity insurance can help cover the cost of defending and settling claims against you for making a mistake, being negligent, or giving poor advice.
Depending on your sector, some professional bodies and regulators will require you to have a professional indemnity insurance policy in place.
If your business owns property, buildings insurance helps to pay for unexpected damage to the premises from something such as a fire or a flood. The cover can include accidental damage as well as costs for things like identifying the source of a gas or water leak.
You should put in place enough insurance to meet the cost of rebuilding the property, including associated professional fees and site clearance. This rebuild cost is different to the property’s market value and you should get it calculated professionally.
If your business does not own a property, you might still want to think about contents insurance to cover the cost of theft or damage to things such as computers, furnishings, fixtures, and stock.
Your business might be doing well, but if a customer fails to square off their account, it can hurt your cash flow and could take you under. Trade credit insurance protects you if customer debts for goods and services are paid late or not settled.
The insurance can give you confidence when establishing new commercial relationships and can make it easier to get commercial funding for you own business at more competitive rates.
The move to digital has transformed the way businesses operate and the products and services they offer. It has also created a whole host of new risks for you to think about.
Your business has to cope with the threat of online fraud and data theft. Criminals may lock your IT systems or encrypt your data. You might get duped electronically into parting with money or sensitive information.
Cyber insurance can help cover the costs of getting your IT systems back to normal as well as repairing reputational damage. It can also compensate loss of income caused by a data breach and offer protection against claims for non-compliance with GDPR.
Safeguarding your business against risks
The right blend of insurance policies will create a safety net to protect your company, its employees, and the people with whom it comes into contact.
But a huge part of keeping you and your business in good shape, is assessing the risks up front, putting in place measures to minimise them and implementing well-considered and comprehensive training and operating procedures.
Working with insurers will give you access to a wide range of tools and advice to help you identify and manage your risks effectively. Insurers can also provide support in responding quickly and effectively when things go wrong.
The risks and policies mentioned here are not exhaustive, but they should form a large part of your considerations when arranging insurance.
Edward Murray is a financial journalist who has written for The Daily Telegraph, The Guardian, The Daily Mail, The Scotsman and Scotland on Sunday