Are you thinking of starting a new business? You know you will need to make sure you have the correct insurance in place, but do you feel confident that you know what you need?
While it might not be top of your to-do list, having the right insurance in place could be the difference between success and failure. If you’re not insured and a claim is made against you could your cash flow survive? And don’t forget your insurance premiums are tax-deductible!
Here is a quick guide run through of the main types of insurance you will want to consider to help protect your business.
Employers Liability Insurance
Employers Liability Insurance is a legal requirement if you employ staff and provides cover if a member of staff is injured, suffers illness or damage because of their work. If you only employ close family members you may be exempt.
Employers Liability Insurance is on a ‘claims occurring’ basis and not a ‘claims-made’ basis. This means that if a claim is notified to you which happened a few years ago, it is the insurance policy that was active during that year that will respond to the claim, not your current policy. Therefore, it is important to maintain a record of who has held your employer’s liability insurance so that claims can be redirected quickly.
The legal minimum limit for this cover is £5 million but most insurers will offer £10 million as a minimum limit.
Public Liability protects against compensation claims for injury or damage to customers, suppliers, or third parties caused by you. If you meet members of the public either at your premises or elsewhere this type of cover may be a contractual requirement. If you exhibit at fairs or craft markets you will be asked to hold this type of insurance and probably provide a copy of it to organisers.
Manufacturers, distributors, suppliers, and retailers could all be liable if a product or a part causes injury or damage to a third party i.e., the person who buys it from you. Product Liability Insurance would cover your legal fees as well as any compensation you are required to pay. It is not currently a legal requirement to hold this type of insurance, but you do owe a duty of care to your customers. Product Liability Insurance is usually coupled with your Public Liability Insurance but check with your insurer or broker as it can vary.
Professional Indemnity Insurance
Professional Indemnity Insurance is important if you provide advice to other people and/or businesses. This type of cover is designed to protect you if you provide them with incorrect advice which results in them suffering a financial loss that could result in them taking legal action against you. Professional indemnity insurance also provides cover for defamation, copyright infringement, and breach of confidentiality.
This type of insurance would cover the legal costs and compensation, within the terms and conditions of the policy. A claim against you could arise if a client claims that one of your downloads contains an image you don’t have permission to use and they felt it has caused them to suffer a financial loss, or perhaps a competitor thinks you have copied their work and they feel you are at fault. This does not mean you are at fault, but the insurance will help you defend such allegations.
Buildings Insurance is a must whether you work from home, or your business premises make sure that you are insured against damage to the structure and that you insure the structure for the rebuild cost and not the market value. If you have a shop, most insurers will include an amount for damage to shop fronts and replacement glass.
Top Tip: the amount of buildings insurance you buy should include land, paths, walls, driveways, and car parks.
You may not have thought about letting your home insurer know that things have changed. But you should certainly tell your home insurers that you are running a business from home. Failure to do so could invalidate any claim made, whether the cause of the claim was related to your work or not. If your property suffered serious damage and a loss adjuster found that you run a business from home, then your insurer could refuse to pay the claim on the basis that you withheld a material fact, however unfair this may seem. As well as telling them you are working from home you might want to make sure they are insuring your business equipment and stock. If your home insurer won’t extend cover to include your business, you should look for a “working from home” policy.
Business Contents Insurance
Business Contents Insurance can protect the possessions and equipment on your work premises. A typical business contents insurance policy will cover damage or loss to furniture, tools, computers, and equipment as a result of various perils such as fire, flood, or theft but can also include accidental damage or malicious damage. You will need to add up the total cost of replacing all your contents to establish the sum insured you need.
Stock can usually be added to most business insurance policies and will provide replacement costs for stock held at your premises or in storage. High-value stock may be specifically insured, for example, digital devices, precious metals, or luxury goods.
Business Interruption is there to help you get back up and running if there is an event, such as fire or flood, which stops or interrupts trading, and this type of insurance can cover the consequential loss of revenue. It can also provide alternative premises so you can keep trading, cover if the main supplier suffers a loss and your business suffers, or cover if a laptop/tablet is stolen preventing you from trading, but check with each insurer for full terms and conditions.
You will need the right Motor Insurance for business use if you are visiting clients in your car or transporting your stock or goods between your business, suppliers or events. Goods In Transit insurance is designed to protect your business from losses caused when you transport or deliver goods because of items being stolen, broken or lost between dispatch and delivery. However, if you are using a courier then they should have this insurance in place as part of the service to you.
Cyber Insurance is vital if you use a computer to run your business, have a website, or social media accounts, or use email marketing. The increase in the number of incidents where people use a computer to commit a criminal offence is on the rise and a cyber insurance policy can help, whether you suffer a data breach or a hacker holds you to ransom. It can also provide cover against damage to your computer systems, removing viruses and loss of income and in addition insurers can also include access to professional cybersecurity consultants and PR experts to help minimise the reputational damage a loss of data could cause your business.