Insurance for small businesses Where to start

When you start a small business you could be forgiven for being a bit bewildered by the complexity of the insurance possibilities. This article will attempt to explain some of the different types of insurance that are available to the small business, and why they are desirable, even obligatory, when running a business. Of course, the insurance you need does depend on the type of business that you’re running, and if you can find a reputable insurance company, you can discuss your needs with them, and they will give you what is known as a tailored quote, which means that it has been specifically constructed to suit you.

Property and buildings insurance

This covers the risks to your business property from fire and flood, lightening strike, explosion from gas escape, and being hit by aircraft, cars or trains. Most of these are in the ‘low risk/high stake’ category, which means that the likelihood of the damage is low but the cost, if disaster strikes, is high. The cover can be extended to cover ‘All Risks’ which includes some accidental damage, but it won’t cover wear and tear, or damage caused because of lack of maintenance. In some countries of the EU, France for instance, some level of property insurance is obligatory, particularly that which covers third party liability. The buildings should be insured for rebuilding costs, often significantly higher than the market value. If your business involves letting, then as a landlord, you are obliged to take out property insurance.

Liabilities

Public liability insurance should be taken out for the premises from which the business is run, but also for any area that you may be working in, for instance if you carry out repairs in clients homes. This means that if somebody is injured on your premises, or as a result of your business activity elsewhere, their medical fees, damages, and your legal fees will be covered. The usual amount covered is up to £5million. This cover is not a legal requirement but you could be bankrupted by a claim from a third party who takes you to court claiming negligence.

Employer liability, however, is a legal requirement. If you have any employees in the business, you must have employer liability insurance. This covers claims due to accident or illness up to a statutory minimum of £10million.

Another desirable insurance is professional indemnity insurance. This covers claims that may be made on you for a mistake that you have made in a professional capacity which have resulted in loss or damage for your client, such as giving poor advice, or making a repair which has been badly done and results in damage or loss for your client.

Product liability insurance can cover you against manufacturing flaws and design defects, among other things.

Business assets and equipment

It is possible to insure business equipment, tools, computers etc, against damage and theft, which is a sensible idea. This cover can be extended to cover associated risks. For instance if theft or natural causes have damaged your tools and equipment, then business interruption insurance would give you some compensation for the time that the business is out of action, and similarly, key man cover, insuring for the loss of essential personnel following accident, injury, or illness. Goods in transit cover can also safeguard your equipment while off the premises, for instance being transported in the works van.

Essential cover

This list is not exhaustive, there are other types of insurance that you could buy, but it gives an idea of the three main categories of insurance and why you need them. Before buying, though, talk to more than one insurance company, and see what they suggest- after all they’re the experts!