What insurance does my small business need?

The world of small business insurance can seem like a minefield and we’re here to help. In this guide, you’ll learn about the different types of insurance you need to consider and why they are important, including:

• Employers’ liability insurance
• Public liability insurance
• Personal accident insurance
• Professional indemnity insurance
• Business buildings, contents and stock insurance
• Business interruption insurance

You are legally required to have employers’ liability insurance as a small business if you employ staff. Even if you hire short-term staff, casual workers or contractors, you’ll usually need this policy.

Employers’ liability insurance protects your business if one of your staff members claims they’ve suffered an illness or injury as a result of working for you. It covers any legal and compensation costs involved in defending the case.

If you employ close family members only, you might be able to seek an exemption. However, it’s always worth double checking that you’re operating on the right side of the law. If you don’t have employers’ liability insurance, the Health and Safety Executive (HSE) can fine you £2,500 for every day you go unprotected. So, it’s better to be safe than sorry.

You’re not legally required to have public liability insurance, but it should still be a key consideration when setting up a business. Public liability insurance covers costs if someone else sues your business – and you might be surprised at some of the claims that businesses find themselves dealing with.

For example, in Ireland in 2018, a shopkeeper was sued by a burglar who injured himself during a break-in. Even cases destined to fail can lead to costs for the business – the shopkeeper in question was asked to pay a €600 processing fee for the claim to be assessed.

If a customer or client was to make a valid claim on your premises, public liability cover makes sure you won’t be left with the bill. Depending on the nature of the injury, compensation claims can go into five or sometimes six figures, once you’ve factored in legal fees and the settlement payment.

You may still want to take out public liability insurance if your business doesn’t have a physical premise. If you’re a consultant, for instance, you could accidentally damage a client’s property while working on site. And if you run your business from the comfort of your own home, there’s still a chance that a customer could bring you to court. 

In some cases, a client might write it into the contract that you have public liability cover before you can work with them.

Public liability insurance doesn’t cover any injury to you, which is why you might want to take out personal accident insurance. This policy means that you or your loved ones still have money to cover your essential expenses in case of accidental injury or even death.

While it doesn’t bear thinking about, as a business owner, there’s a greater argument for taking out personal accident insurance. Ultimately, you don’t have an employer to fall back on if an accident forces you out of work.

With personal accident insurance, the accident doesn’t need to have happened at work for you to be covered. That means you should still consider taking out cover even if you don’t work in a particularly high-risk environment. Perhaps you’re a bit of an ‘adrenaline junkie’ outside of work, or you just want the security for added peace of mind.

Professional indemnity (PI) insurance covers you for costs if you make a mistake in a piece of work for a client that causes them financial or reputational loss. PI insurance is particularly valuable if your business gives advice or offers a professional service to other businesses, or if you deal with client data or intellectual property.

While you won’t go with the intention to make a mistake (of course), everybody is capable of the odd slip-up, especially when they’re trying to spin plates managing their own business. However, if that error results in you accidentally sharing sensitive information without permission, or loss of a sensitive document, a client could have grounds to make a claim against you.

For this reason, make sure you’re doing everything you can to minimise errors. Many mistakes come from being overworked and a lack of time, so take advantage of tools that will help you cut down on time-consuming tasks and admin. 

Countingup is the two-in-one business account and bookkeeping app that helps self-employed people across the UK save hours on time-consuming admin. It automates bookkeeping tasks, making it simpler to manage financial admin and reducing the risk of mistakes. 

Whether you work from home or have separate business premises, you should consider business buildings insurance. It works in a similar way to buildings insurance, but is especially designed for businesses, covering your property under circumstances in which a standard home insurance policy might not.

You can also take out cover for the contents of your business premises, as well as for tools and equipment. A policy could pay out for repairs and replacements in the event any of these items are lost, stolen, damaged or destroyed.

This cover will pay the cost of replacements or repairs. If any of these items are crucial to your work, it’s really important that you’re able to get them back as quickly as possible to minimise business interruption.

Meanwhile, if you manage your own stock, whether on your premises or in storage, stock insurance will cover the cost of replacing it if it’s damaged, destroyed or stolen. No business wants to find themselves in a position where they’re unable to fulfil orders for reasons out of their control – not all customers are forgiving, and in the case of ruined stock, you could potentially lose money on a sale.

All kinds of things can prove to be an interruption to business, from a flood or fire to civil unrest. Covering yourself against financial losses that are a direct consequence of a business interruption, such as loss of revenue, loss of rental income and additional staff costs, will help your business get back to where it was before disaster struck as quickly as possible.

As with every big investment, you need to protect your business against anything unexpected which could put a strain on your finances. The coronavirus pandemic might be the best example of why you should act now – and not later – to make sure you’re covered against potential threats to your business.

Covid-19 forced many small businesses to close their doors and pause trading for months at a time. Those with the relevant business insurance will be able to recover some of the losses they suffered during this period.

In January 2021, the Supreme Court ruled in favour of small firms receiving payments from business interruption insurance policies, after many insurers refused to pay out on certain policies. The ruling is expected to provide a lifeline for many of the affected businesses, helping to make sure they can continue trading beyond the coronavirus crisis.

So, while there’s often a temptation to save money on insurance premiums and take the risk, the right policy – or combination of policies – gives you a platform to build a successful business, free from the worry of ‘what if?’.

Insurance is an essential safety net that can help you get back on your feet if you’re ever dealt a bad set of cards.

Looking at this lengthy list, insuring your business against disaster can appear an expensive outlay – but you probably won’t need to take out cover against every single risk. Plus, insurance premiums for each of the products are often as little as a few pounds a month.

Insurers will set your premiums based on factors such as the size and type of business (smaller businesses typically carry less risk than bigger companies), the nature of the work and the number of employees on your books. Use a comparison tool to get a feel for how much business insurance is likely to cost you, and to compare quotes. Websites like MoneySuperMarket, Compare the Market, and GoCompare are good places to start and will guide you on what business insurance you need including any new risks such as cyber threats

With the right insurance in place, you can rest easy knowing that your small business is covered against the unexpected. To bring five star Trustpilot-rated cover to small businesses like yours, we’ve partnered with insurance provider, Superscript. Click here to get a quote in minutes.