Small business insurance can help protect against property loss or damage, as well as being sued by a customer or other people for injury, damage or providing negligent advice. This article explains what you need to know about the basics of small business insurance. After reading this, you will have a better understanding of the types of insurance you might need for your small business.
What kind of insurance should a small business have:
A small business should consider many types of insurance such as public liability, product liability, employers’ liability, professional indemnity, property insurance, legal expenses cover, cyber insurance and more.
Ultimately, the insurance needs of one company will differ from the insurance needs of another company. Each company has unique risks, and need to insure against these. Here is a very high-level overview to help you understand how and when these main types of small business insurance can be useful.
- A business that has hired any employees needs employers’ liability insurance.
- A business that has in-person dealings with customers or other members of the public should have public liability insurance.
- A business that makes, sells or repairs any goods should have product liability insurance.
- A business that is paid for selling advice or service should have professional indemnity insurance.
- A business that takes customers’ payments, stores customer data or is dependent upon IT systems should have cyber insurance.
- A business that owns expensive property such as their premises, equipment or inventory should have suitable buildings and/or contents insurance.
- Legal expenses cover can assist any business with contract disputes, HMRC investigations, debt recovery and more.
There are other types of insurance a small business might need as well, but these are the main types that a typical small business should know about as they start learning about business insurance.
H2: What type of insurance is required for a small business?
The only type of insurance that is required by law for a small business is employers’ liability insurance. The law requires that businesses are insured against liability for injury or disease to their employees arising out of their employment. There are exceptions to this compulsory insurance, but in most cases, it is required if you hire any employees. And you must have at least £5 million of cover from an authorised insurer.
Exceptions include certain cases of hiring a close family member or hiring an independent contractor, but the rules are quite stringent. And any business that is caught without employers’ liability insurance can be fined up to £2,500 a day. So even if no employees are ever injured or fall ill because of their job, being without employers’ liability insurance can prove to be very costly indeed.
Public liability insurance is not required by law, but it is still very important to have. Without a policy, a company can be sued for accidental injury or damage to a third party and have to pay the legal costs and compensatory damages on their own. Many small businesses would face serious financial difficulties having to pay these costs without insurance.
Also, a business’s clients might require the business to hold public liability insurance. They might even insist on seeing the certificate of insurance. And certain trade organisations might require it, for example for certain tradesmen.
Professional indemnity insurance is also not required by law, but it is a requirement to be a member of many professional trade organisations. Many architects and accountants, for example, would be required to hold a policy with minimum limits of cover.
H2: How much is public and product liability insurance for a small business?
Public and product liability cost around £118 a year for a typical small business. However, businesses that are potentially more dangerous to third parties, such as construction businesses, will pay a higher premium.
Public liability and product liability are often sold together. In fact, as public liability is the more sought-after and known product, it seems that product liability is frequently included in many public liability quotes, and a business might not even need to specifically request it. Be on the lookout for whether or not this is the case for any public liability product you are considering.
H2: How do I get insurance for my small business?
There are plenty of ways to find insurance for your small business, including using comparison sites, calling a business insurer directly or using a broker. A benefit of calling up a broker is that they can give you an advised service, and they are looking out for you, the customer. They’ll take your details and get quotes from insurers they think might offer the coverage you need. However, you’ll typically need to pay a fee or commission to use a brokers’ services.
Comparison sites can be good for those who know what they need and who don’t want to pay a commission, but businesses with complex applications or questions likely won’t find this a suitable option – unless the comparison site connects you with a broker who can guide you.
Buying insurance directly from an insurer again can be cheaper since you won’t pay any extra fees or commissions, but remember any agents you speak with are working for the insurer, not you.