Public liability insurance
This is one of the most popular types of business insurance, and it’s a must-have for any business that interacts with the general public. If you or an employee accidentally injures someone or causes damage to their property, this insurance is designed to cover any compensation claims.
For example an IT consultant who spills coffee on a client’s computer, or a window cleaner who drops a bucket on someone walking below could be sued.
If the business has a good public liability policy in place, the insurance company would fork out to cover legal fees and compensation payments.
Your client contracts may specify a required level of public liability cover – usually £5 million or £10 million.
Product liability insurance
This is similar to public liability insurance, in that it covers compensation claims due to injury or damage caused to a member of the public. The difference is that the injury or damage is caused by a product that has been supplied, installed, maintained or manufactured by you.
For example, faulty wiring in a remote control car causes the toy to overheat and catch fire. The product liability policy could cover compensation claims for subsequent property damage.
It’s important to recognise that this doesn’t act like a warranty: it won’t provide cover if the product fails to function properly or stops working.
Professional indemnity insurance
This insurance is crucial if you give professional advice to your clients, or you provide your clients with a service. It’s a key cover for businesses including architects, management consultants, accountants and IT contractors.
If your client suffers a financial loss because of a mistake that you make in your work, a good professional indemnity policy covers any compensation claims that are made against you.
For example, if you’re an architect and you design a house that later collapses because your plans were faulty, the owner may sue you for the losses they’ve suffered.
Employers’ liability insurance
This insurance covers you for any claims made by your staff for injury or illness that they believe has resulted from their work or has been caused by their workplace.
For example it would cover you if an employee sought compensation because they broke their arm when they tripped on loose office carpet.
This is the only type of business insurance that’s required by law. If you have employees, you can be fined up to £2,500 for each day that you don’t have an employers’ liability policy in place. The law requires a cover limit of at least £5 million.
There are some exemptions, for example if you only employ close family members then you’re usually not legally obliged to have this cover.
Other useful covers
Although these are the main cover types, each business has different insurance needs, and it’s important that you get a tailored policy to suit your business.
Other cover options that you could consider include office equipment, stock cover, turnover protection and buildings and contents insurance.
Simply Business compares quotes from a panel of leading insurers, and helps you create a policy package that’s tailored to your business.
Further reading on small business insurance