What business insurance do I need for my startup?

As you begin your startup journey, you may be asking “do I need business insurance?” There are so many things to consider when you start your own business that setting up insurance could be seen as something you can put off until later. Well, we’re here to tell you why business insurance is a must have, not just a nice to have.

Business insurance is there to protect you against financial losses associated with running your business, however small your company is right now - even if it’s just you! No matter how well-prepared you are, accidents can happen - whether that’s someone slipping over in your shop, damage to your stock or premises, or a client-facing mistake that loses you money.

And if you’re unlucky enough to face a compensation claim against you or your business, you could incur significant financial losses. Having insurance in place from day one gives you peace of mind, because the compensation will be paid by your insurance company, not by you.

Given how easily accidents and mistakes can happen, business insurance should be one of the ‘must haves’ in your budget, not just a ‘nice to have’.

Let’s look at each of these in more detail.

1. Public liability insurance

As a business owner, particularly one that regularly interacts with third parties, it is crucial to have public liability insurance on your radar. This is because anyone can bring a public liability claim against a business. If someone falls ill, gets injured, or has their property damaged due to your business activities - whether directly or indirectly - they could potentially file a claim against your company.

Public liability insurance is a safety net for your business operations, offering coverage for the legal costs, compensation and expenses related to claims brought against your company. 

While public liability insurance is not a legal requirement for running a business (the only compulsory insurance cover you need is employers' liability insurance if you employ staff - see below). However, you should consider it if you frequently interact with third parties like members of the public, customers and external suppliers.

2. Employer’s liability insurance

Employer's liability insurance protects you if your team faces an accident or illness due to their work. This keeps your business safe from employee-related compensation claims. Plus, it's a legal requirement if you have any staff - even if they are volunteers.

If your business employs anyone, you need to have at least £5m of coverage, or you could face a fine of up to £2,500 for every day you lack this insurance. There are a few exceptions (for instance, the requirement does not usually apply if you only employ immediate family members) but most businesses will find this type of insurance essential. It should cover claims brought by all employees, whether they work on a permanent, temporary, casual, seasonal, subcontracted or voluntary basis.

This coverage is a critical aspect of protecting your business and its most important asset - its people.

3. Professional indemnity insurance

Professional indemnity insurance protects against potential losses due to negligent advice or service on your part. It might be hard to accept that you need this - of course you’d never deliberately be careless - but sometimes, despite our best efforts, things don't go to plan. 

If a client says they’ve lost money due to poor advice or faulty work provided by your business, professional indemnity insurance can safeguard you against legal costs and compensation payments. It also covers breaches in GDPR or copyright law, or other ways that could damage your company’s reputation.

4. Business buildings and contents insurance

Building and contents insurance protects your physical business location and its assets from unforeseen damages. For example:

• Theft

• Fire

• Floods and burst pipes

• Subsidence

• Accidental damage

• Business interruption as a result of property problems 

Business building insurance is the responsibility of the person that owns the building - so if you’re renting space then your landlord should have this covered. But it’s still worth considering contents insurance for any stock or equipment you keep on the premises. 

If you’re the building owner, then it makes sense to insure it. It may even be a requirement of your mortgage lender.

5. Tools or stock insurance

If your business relies on physical stock, or expensive specialist tools, then it’s crucial to get them insured. Think of how much it would cost to replace your goods or gear if anything was lost, stolen or damaged. Not only that, but the financial impact of having to pause your business activities while waiting for replacements could be extremely costly. 

Depending on the level of cover you require, your other insurance policies (such as business content insurance) might be enough for your needs. We’d recommend double checking so that if something does happen, you can bounce back swiftly. If you find that your tools or stock are not covered, you can get a quote from Superscript in less than 4 minutes and fully insured in 10.

6. Income protection insurance

As a self-employed entrepreneur, you aren’t eligible for statutory sick pay if you’re unable to work for medical reasons. If you couldn’t work due to an injury or illness, the loss of earnings could have a huge impact on your personal finances. 

With income protection insurance, you agree how much you want to be paid out each month - eg £1,500 - and pay the relevant premium. If you're ill for more than 4 weeks, you can make a claim. You may like to consider revisiting your Personal Survival Budget to work out your essential personal outgoings.

It's worth noting that you will need to share information about your medical history, and may be required to undergo a health check to determine the likelihood of a future claim. The cover will pay up to 12 months per claim but can be claimed as many times as you need to while the policy lasts.

7. Vehicle insurance

If you drive passengers or goods around for money (eg taxi drivers, couriers and delivery drivers) or work using agricultural machinery, forestry vehicles, plant or construction vehicles, then you’re legally obliged to have commercial motor insurance. 

If your business isn’t focused around commercial vehicles, but you still need to use your personal vehicle for occasional business purposes, make sure you double check the terms of your personal vehicle insurance. It might not cover you for accidents that occur when using your vehicle for business purposes, leaving you open to financial risk. 

8. Home business insurance

If you run your business or work on a self-employed basis from home you might assume that your domestic building and contents insurance policy covers all your needs. However, this often isn't the case. 

A specialist home business insurance policy will cover you in circumstances that won’t be covered by your domestic insurance. For example, the risk of injuries on your premises, IT failures and data breaches, or the loss or damage of equipment stored in your home. 

Every home-based business has unique risks and coverage needs, so it's important to discuss your situation with an insurance professional. They can help you identify potential vulnerabilities and ensure your home business insurance policy provides the protection you need. 

9. Cyber insurance

Cyber insurance, also known as cyber liability insurance or cybersecurity insurance, is designed to cover risks that come with storing and handling data when running a business.

It protects your business from risks such as:

• Accidentally breaching privacy

• Business interruption (if your server crashes)

• Hacking, extortion and ransomware (if someone breaks into your network and customer data is vulnerable)

• Lost income and restoring data

• Malware

• Cybercrime