updated July 27, 2022
6 minutes of reading
Reading: How does small business insurance work
Handling insurance on top of everything else as a small business owner can be overwhelming, but it’s one of the most important things to think about. These are the top 10 questions to ask about small business insurance.
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what are the essential elements of insurance?
every business is different, which means everyone will have different insurance needs. The coverage you need will be affected by many factors, including:
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your business billing
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how many employees do you have
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the sector in which it operates
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whether you deal with the public or not
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if you have a work place
The four main types of insurance for any small business owner are:
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employers’ liability insurance
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civil and product liability insurance
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professional indemnity insurance (pi)
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See also: What is Full Coverage Car Insurance? – ValuePenguin
building and content insurance
We previously discussed the must-haves of small business insurance, so you can find more information in our article.
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do I need employee insurance?
yes. employer’s (el) liability insurance is essential if his business employs someone, or if he supervises or directs someone. This type of policy will cover both you and your staff in case of injury or illness that is a consequence of your work. For example, a tradesman you hired could fall off a scaffold and be out of a job for a few months. Or, at the less dramatic end of the scale, your secretary might claim the repetitive strain of years of computer work.
Insurance isn’t just a nice thing to have. For most companies with employees, it is a legal requirement that must cover temporary, part-time and full-time workers, as well as people who have been previously employed by you. there are two main exceptions:
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family businesses (where employees are children, spouses or parents of the business owner) that are not limited partnerships
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limited companies in which an employee owns more than 50% of the share capital
The minimum legal requirement is £5 million of cover, but it may be prudent to increase your policy size if you work in a high-risk industry. Without proper insurance, you can be fined up to £2,500 a day and could be liable for damages, medical costs and more.
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what insurance do I need as an advisor?
You may think you don’t need advice if there’s no chance you could cause physical harm to your clients or their property and possessions. But insurance for consultants is just as essential as it is for other small business owners.
Not all businesses will need the same level of professional indemnity insurance (PI), and the coverage you need will depend on the type of clients you work with. For example, lawyers advising multinational companies will need broader coverage, as even the smallest mistakes can be very costly when working with international companies.
You can refer to our professional liability insurance guide for more information.
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what insurance do I need to work with the public?
If you offer a service or product that involves working with the public in any way, you will need liability insurance. You will be covered for claims between £1 million and £10 million, depending on the level of cover you choose. not all companies will need to take out a policy, but it is advisable if you:
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visiting customers, which means your equipment or the work you do could cause damage or injury
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they are visited by customers, which means they could be injured on your premises
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work in public, which means your work could harm a client, bystander or property
The purpose of liability insurance is to protect you against the financial consequences of a job-related claim. A personal trainer, for example, could be sued by a client for an injury that occurred during a session, even if he had nothing to do with his service and just happened on the premises by chance (like a sprained ankle). .
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what insurance do I need as a contractor?
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Contractors are likely to operate as sole traders, meaning they are not likely to need employee-related insurance. In addition to the basics we’ve already covered, here are a couple of other types of insurance all contractors should seriously consider:
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Tax Liability Insurance: You’ll be protected if hmrc decides to review your accounts for things like ir35 inquiries, paye reviews, and vat issues.
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Travel Insurance: While not strictly business insurance, purchasing a travel policy that covers you, your belongings, and any potential medical or legal costs while traveling internationally for work is an smart decision.
You can refer to our detailed guide to the insurance needs of contractors for more information.
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Do I need to insure my workplace?
If you rent or own separate property for your business, such as an office or warehouse, you’ll need business property insurance to cover any claims for your workplace. Taking out a policy is likely to be a contractual obligation if you rent the premises, as the landlord needs assurances that they won’t be financially responsible for any damage you cause.
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does my team need insurance?
Your equipment is likely to be one of the most expensive things in your business, so it’s wise to make sure it’s protected. Commercial Contents Insurance (BCI) is a great starting point as it will insure items in your facility against accidental damage and theft. It’s not a legal requirement and it’s not necessary for every business, but it’s sensible if you have high-value equipment or large volumes of inventory that you can’t afford to replace.
However, if you have specialized or high-value equipment, you may need to take out a specialized policy to ensure you have the right level of coverage. You can also secure intangible assets, such as patents or data stored on your systems, that would cause you to suffer financially if lost. If you’re not sure exactly what type of coverage you need, it’s always best to talk to an advisor or broker first.
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what are the consequences of not being properly insured?
here are a couple of horror stories to show you exactly what we mean. Australian company Bizcover shared the terrifying story of how a simple mistake on a marketing and design agency’s website cost the company A$1.2 million (£637,000). a staff member incorrectly stated that one of the company’s clients had been terminated and had ceased operations, prompting the mining company to file a lawsuit for defamation and reputational damage.
Even if your mistake isn’t that costly, it can still impact your business. another website shared the story of a maintenance company that failed to purchase proper insurance before installing a television. when one of the workers accidentally dropped it, the company had to buy another one from the customer.
If you’re just starting out, profit margins are likely to be slim, meaning even a few hundred pounds of liabilities could lead you into debt. But even if there are no significant financial consequences for your mistakes, proper insurance can help you deal with any legal process quickly and thoroughly, minimizing any negative impact on reputation.
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Does my insurance cover everything I need?
You’ve researched what policies you need and found providers who offer a good deal. surely that’s all you need to do. Unfortunately, not all insurance policies are created equal. Before deciding on a provider or product, it is essential to analyze the exact level of coverage offered by each policy.
for example, in the aftermath of 2004 hurricane katrina in the united states, many business owners were hit hard when they realized their property insurance did not cover flood damage. livelihoods were lost due to not having adequate insurance. It’s essential to sit down with an advisor if they don’t understand exactly what your policies cover to ensure you’re as protected as possible.
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can an advisor help me find small business insurance?
Fortunately, an advisor can help you determine exactly what you need to be fully covered as a self-employed person or small business owner. You can also choose the brains of an experienced accountant or Independent Financial Advisor (IFA) to make sure your finances are in the best possible shape.
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