Business insurance protects you against financial losses associated with running your business. Unfortunately, there are risks associated with any business activity. From someone slipping over in your shop, to an employee having an accident, or a client losing money as a result of a mistake you’ve made.
If you’re unlucky enough to experience one of these problems, you could face significant financial losses. And if a compensation claim is brought against your business, it could amount to millions.
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’.
Eight essential insurances for small businesses
This depends on the nature and size of your business.
The three main insurances – which protect you if you get hit with a big-bucks law suit – are:
- Public liability insurance
- Employer’s liability insurance
- Professional indemnity insurance
After that, you should also consider the following:
- Building and contents insurance
- Stock insurance
- Income protection insurance
- Vehicle insurance
- Home business insurance
1. Public liability insurance
Public liability insurance protects you against financial losses if you cause damage to a person or property in the course of your work. Usually this means if a compensation claim is brought against your business, for example, if someone trips over a trailing cable in your café.
Although it isn’t a legal requirement, you should definitely consider public liability insurance if you work with third parties – such as the public, customers or suppliers.
2. Employer’s liability insurance
Employer’s liability insurance only applies if you employ staff – obviously – and it is a legal requirement for employers to have it.
Employer’s liability insurance covers any compensation claims your business might be subject to from your staff, if they have an accident or fall ill as a result of working for you.
3. Professional indemnity insurance
Professional indemnity insurance protects you if a client loses money because you’ve provided negligent advice or services. It is a hard one to accept that you need (I’d never be negligent!) but mistakes do happen.
This insurance covers financial loss and damage to people or property resulting from your mistakes.
For example, if you’ve:
- made a mistake in the advice you’ve given and cost a business money
- created a product that injures the user
- breached GDPR or copyright law
- damaged the company’s reputation in some other way
4. Business buildings and contents insurance
Business buildings insurance protects you against the financial loss associated with a range of – not entirely out of the question – premise problems.
- Burst pipes
- Accidental damage
- Business interruption as a result of property problems
Depending on what policy you take out, this can cover the building and any stock / equipment on the premises.
Business building insurance is the responsibility of the person that OWNS the building. So renters don’t need to worry about this; it is your landlord’s duty. However, you might still want to consider contents insurance.
If you own a business building, it isn’t a legal requirement but it makes sense. It may be required by your mortgage lender, if you’ve borrowed money to buy the property.
5. Tools or stock insurance
This covers the cost of replacing your stock or equipment if it is lost, stolen or damaged. This may be included in other insurance policies, such as business contents insurance. But make sure you check and that it covers you for the right amount.
6. Income protection insurance
This insurance is important for self-employed people who - if they get sick - can't earn. You agree how much you want 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 be subject to a health check to determine the likelihood that you'll claim. The cover will pay up to 12 months' per claim but you can claim on the same policy multiple times during the term.
7. Vehicle insurance
Depending on the vehicles involved in your business, you may need to amend your personal vehicle insurance or take out specific business vehicle insurance. Your personal insurance may not cover you for accidents and issues incurred when using your vehicle for business purposes.
8. Home business insurance
This is designed for people who use their home as their business premises, such as freelancers or people who sell products online. Your domestic building and contents insurance may not cover items you use for business in your home. Policies differ but can cover you for a combination of buildings and contents, public liability and professional liability insurance.
Here at Transmit Startups, we are advocates of having the right insurance for your business. As part of our pledge to provide outstanding support to startups, we've partnered with various service providers you might need. To find insurance deals we rate, take a look at our Startups Marketplace.