Starting, running or growing a business is exciting. You’re bringing your dream to fruition and a lot of hard work will have gone into making it happen. In all the excitement it can be easy to push the drier administration tasks to the bottom of your to-do list but, after working so hard to launch or build your business, you’ll want to make sure it’s protected.
Although employers liability insurance is the only type of business insurance that’s a legal requirement, other types of business insurance are worth looking into as well. We’ll explore these in more detail later.
What is business insurance?
So what is business insurance, how does it impact your business and what type do you need?
At a very basic level, business insurance is essential because it can provide a layer of protection if things go wrong. When running a business there’s always the potential for unexpected events that could impact you, whether it’s extreme weather damaging your property or a legal complication that affects your ability to trade.
Business insurance can help protect your business from the potentially devastating impacts that setbacks like these can cause. However, it’s important to know that there are different kinds of insurance available. You need to bear these costs in mind when working out your break-even point, which includes: closing costs, taxes, fees, insurance, etc. This is why you need to plan, and budget for, the types of insurance you might need.
In this guide, we’ll cover everything you need to know about what is business insurance in the UK, including:
- What business insurance is required by law?
- What insurance do I need for my business?
- Types of insurance for business
Insurance can seem like a daunting subject, especially if you’re only just starting a business, but it’s an important area that needs to be considered so let’s explore in more detail.
What business insurance is required by law?
The first and most crucial thing to understand is what kind of business insurance you must have to operate. Business insurance in general might be about protecting your interests, but the legal requirement is about your responsibility to others.
So, what business insurance is required by law in the UK?
If you have any employees, subcontractors or even someone in on work experience, you must have employers’ liability insurance. This will ensure you are covered for any claims in the event of injury, illness, disease or death of staff while they are doing their work for you.
When you are registering your business for the first time, you will also need to apply for insurance in terms of employers’ liability coverage.
Types of insurance for business
There are many different types of insurance for businesses, not all of which will be essential, but it’s useful to have an understanding of what is available.
Here are 8 of the most common business insurance types that you might need:
Public liability insurance
While employers’ liability insurance covers you in the event of something happening to your staff, you also should consider third parties like your customers, clients and suppliers to name a few. Public liability insurance offers protection against injury and damage claims brought against your business by third parties like these and can help protect you whether the incident or event happened at your workplace, a customers’ or somewhere else.
This protects your physical assets (your buildings, equipment, furniture and inventory) against damage or loss in the event of fire, theft, natural disasters, etc.
Professional indemnity insurance
If you handle sensitive client data or intellectual property as part of the services you offer, professional indemnity insurance covers you in case something goes wrong, whether through negligence or hacks.
Product liability insurance
This kind of insurance covers you against any damage, injury or illness caused by the products you create or sell. It’s worth noting that you could be liable even if the product was used incorrectly and it wasn’t your fault.
Business interruption insurance
In case of natural disasters or some other event outside of your control that causes you to close, this insurance can help keep you from going under. It might be worth double-checking policies to see if pandemics are covered.
The impacts of a hack can be covered under other types of insurance, but if you are particularly vulnerable to them because your business is something like ecommerce, specific cyber insurance can be crucial.
Legal protection insurance
For a small business, the threat of legal action can be incredibly daunting, especially when it comes to paying to get professional defence in court. This is why it can be important to have insurance in place to cover these costs and potentially prevent you needing to make a much bigger payout by settling out of court.
Key person insurance
This could be one of the most important types of insurance for your business if you are a small business. It covers you in the eventuality that you or another director or vital member of staff is unable to work due to illness, disability or even death, helping the business cover the costs of this absence.
This isn’t an exhaustive list and there may be other insurance policies your business could benefit from, so always do your research. Remember to compare quotes from insurance providers and always check the fine print on the policy cover offered to make sure you’re getting the right protection and the right price for your business.