Whatever the kind of business you operate, you will likely need to take up some types of insurance. Some business insurance may also be a legal requirement depending on the nature of your business. You will first need to consider the kind of business you have, look into what business insurance is a legal requirement, and what other risks you face that may require coverage. Before we delve into the types of business insurance you may need, let us look at why this cover is necessary.
Why You Need Business Insurance
Prevent Financial Losses
The primary reason for taking up business insurance is to prevent devastating financial loss that can result from property damage or having to pay compensation from liability claims. Whenever you invest in a business, much of the money will likely go towards assets like vehicles, machinery and other equipment.
Avoid Out of Pocket Payments
If an incident occurs that leads to injury or damage and you do not have insurance, you may be compelled to pay out of pocket for expenses and possibly have to close the business to cover the debt. If a liability claim is successfully made against your business and you do not have insurance, you may again be forced to pay out of pocket for the compensation.
Legal Requirement
Both outcomes can cause financial devastation that could end your business and put you in debt. To protect businesses from suffering such consequences, many governments, therefore, require certain bare minimums when it comes to taking business insurance. It is also important to note that as your business grows over time, so too will your insurance needs.
Protect Employees
Having insurance can also help to safeguard your employees. In case they are injured on the job, fall sick or become unemployed, having the right insurance can help ensure they do not suffer financial hardship as a consequence.
Protect Customers
Liability cover also helps to protect customers by enabling them to get medical care and compensation in the event they suffer injury related to the business. Even the legal costs associated with lawsuits can be costly for some businesses to cover, hence the benefit of such coverage.
Risk Management
Insurance also helps to ensure that you are managing risks appropriately. As said, it is important to look at what risks your business is exposed to and take suitable insurance, even if not legally required.
Peace of Mind
Ultimately, business insurance is a great way to enjoy greater peace of mind as you run your business. It will help save money, time and stress as you will not have to worry about harsh financial losses putting you out of business.
Types of Business Insurance
When deciding on what kind of insurance to take up, you need to figure out what is legally required and the range of risks your business is exposed to. Let us now look at the most common types of insurance business owners take up and why.
Employer’s Liability Insurance (EL)
This insurance is a mandatory requirement for all businesses that have employees by the Health and Safety Executive (HSE). It protects a small business in the event an employee is injured or falls sick as a result of a work-related incident and they make a claim. This cover provides for legal and compensation costs that may be involved in the event of a lawsuit.
Failure to have this cover can result in fines that apply each day your business remains unprotected. Hence the need to ensure this cover is in place right from the start.
Public Liability Insurance
If your business interacts with customers in person, be it at your business premises or even in clients’ homes, then this cover protects you from compensation claims if they are injured or suffer property damage. Public liability insurance protects the business from claims made by members of the public that could result in substantial legal costs and compensation amounts.
With this cover, the business avoids having to pay monies out of pocket and leaves this to the insurer to handle. You get to focus on your business with less worry. While public liability insurance is not a mandatory legal requirement, you may find some clients and even suppliers will request that you have public liability cover for them to work with you.
Professional Indemnity Insurance
This insurance is helpful for more service-based businesses. Some professional bodies such as those for accounting and architecture may also require it if you want to be a member. If your work involves giving professional services, advice, or handling of client data or intellectual property, it means that a small mistake could lead to your client suffering financial losses or other exposure.
If this happens, your client may be entitled to sue you, hence the benefit of professional indemnity insurance that will protect you from financial losses caused by paying substantial legal fees and compensation.
Business Contents Insurance
Every business requires the use of certain equipment, furniture, machinery or other physical assets. Even for those that work from home, the computers they use are essential otherwise they cannot conduct their work.
Business contents insurance provides coverage for these physical assets that may be damaged or lost through incidents like fire, flooding, theft or other events. If the loss or damage of these items can impair your ability to work, then contents cover should be sought.
Portable equipment cover should be a component of this cover if you take such items with you on the road. It refers to such portable items as laptops and smartphones that are an essential part of your business operations.
Commercial Motor Insurance
If your business requires the use of a motor vehicle, then it is important to have adequate commercial motor insurance. At the very minimum, you will need third party coverage. This will provide liability cover in the event someone suffers an injury or damage to property as a result of the company vehicle.
Comprehensive insurance cover may be more expensive but will take care of costs involved in making repairs to your vehicle or compensating you in case of theft. If using a personal or private car for business activities, it is important to ensure your cover extends to this.
Product Liability Insurance
If your business involves the design, manufacture, or supply of physical products, it is advisable to have a cover that protects you financially in case the products turn out to be faulty and cause injury to customers or cause them to experience property damage.
Product liability is a form of liability coverage that covers legal fees and compensation claims. It can be included within public liability policies. If your business operates within a supply chain, other businesses within this network may require that you have this cover.
Business Buildings Insurance
When you have premises like a shop or office from which you run your business, business buildings insurance is advisable. It helps ensure that in event of property damage due to such incidents as fire or flooding, you do not have to cover the cost of repairs and restoration.
Ensure that this policy covers the full rebuilding cost and not just the market value of the property. This is important if you have invested additionally in other structural work to support your business activities. If working from home, be sure to check that your home insurance does extend to include this.
Business Interruption Insurance
This policy is helpful for businesses that may find themselves unable to operate for a period and are as a result suffering financial losses due to a lack of sales and profit. This could be due to natural calamities like floods or fires.
Also known as business income insurance or business continuity insurance, this cover enables businesses to recover financially from this disruption that has interfered with their revenue-making ability.
Directors and Officers Liability Insurance
For businesses that have directors and other senior officers with management responsibility, this liability cover protects them from having to endure personal claims. Whether it is due to their actions in breaching safety laws, financial misconduct, or misadministration, this cover allows them to have the associated legal fees and compensation claims that may result covered.
Also referred to as management liability insurance, this cover may however have some limitations such as not covering in the event of insolvency, which is commonplace with start-up businesses. Depending on the wording of the policy, it may also only provide cover against lawsuits from only small shareholders, meaning that large shareholders may still be able to make claims.
Cyber Insurance
As businesses become increasingly reliant on data to run and grow their businesses, they have also become more vulnerable to cyber-attacks and data breaches. In case of such attacks, it becomes possible for businesses to suffer legal claims that will require dealing with legal fees and compensation costs.
Some businesses may also be subjected to General Data Protection Regulation (GDPR) fines. Cyber liability coverage can help to cover these financial costs that result from cybercrime, and depending on the policy, may also assist in securing needed IT systems and customer service support.
How to Secure the Right Business Insurance?
It can be difficult to ascertain what selection of business insurance policies you will need to adequately and affordably secure your business. More so if you do not have a background in or good knowledge of the insurance business and the various types of business insurance there is in the market.
This is why it makes sense to partner with an insurance provider that will step in to make a comprehensive assessment of the risks your business faces and correctly advise you of what range of policies you will need. A tailored insurance package ensures that only risks that relate to your business are covered.
First Business Protection is a specialist broker that has worked with businesses from all major sectors including construction, manufacturing, leisure, and real estate. Our familiarity with how these businesses operate and comprehensive understanding of the insurance business means we can provide bespoke insurance packages that uniquely match the needs of our clients.
Even with a price comparison of our business insurance quote against the other many insurance providers, you will find that we endeavour to provide competitive deals that carefully balance the aspect of pricing with risk management.
We have a dedicated team of insurance experts that work to fully understand the needs of our clients and their businesses, before coming up with tailored insurance solutions. Our professional service also assists clients through the claims process so they can get back on their feet as soon as possible.
We understand that businesses can change over time, expanding or even altering the nature of their work. As your brand evolves, we will continue to remain flexible and adaptable to your new circumstances by duly adjusting your tailored insurance package that will discard whatever you no longer need while adding on to cover new risks.
By taking a personal approach in developing insurance packages for clients, our team ensures that the business insurance our clients take up is suited to their need to protect their business as it grows. We will be with you every step of the way as you seek to understand what coverage is needed for the nature of your operations and what underwriters are your best option.
