Starting and running a business means taking on risk. While that’s part of what makes entrepreneurship exciting, you’ll want to protect what you’ve built. Let’s walk through everything you need to know about insuring your business properly.
Employers’ liability insurance – compulsory if you employ anyone
Before we get into the optional coverages, let’s talk about what the law requires. If you employ anyone – even if it’s just one person working part-time – you need Employers’ Liability Insurance. This covers you if an employee gets injured or becomes ill because of their work. The minimum coverage required is £5 million, though most insurers provide at least £10 million of coverage.
Think this doesn’t apply to your small operation? Think again. Your “employees” include temporary staff, students on work placements, and even volunteers. The Health and Safety Executive takes this seriously – they can fine you £2,500 for each day you operate without proper coverage.
The other non-negotiable is motor insurance if your business uses vehicles. Basic third-party coverage will protect you if your vehicles cause damage to others, but most businesses opt for comprehensive coverage. This gives you protection against fire, theft, and damage to your own vehicles too.
Business buildings and contents insurance
Your business premises and everything inside them represent a major investment. Buildings insurance covers the actual structure – from the walls and roof to built-in fixtures. But here’s something many business owners get wrong: you should insure for the rebuilding cost, not the market value. These can be very different numbers.
Contents insurance picks up where buildings coverage leaves off. It protects everything that would fall out if you turned your building upside down – inventory, equipment, furniture, and so on. When insuring stock, use the cost price rather than retail value. Remember seasonal fluctuations too – if you carry more inventory before Christmas, make sure your coverage reflects this.
Business interruption insurance
Here’s a sobering statistic: 80% of businesses that suffer a major incident fail within 18 months if they don’t have proper coverage. Business interruption insurance helps you survive when you can’t operate normally. Maybe a flood has damaged your premises, or a key piece of machinery has broken down. This coverage helps replace lost income and pays for additional expenses while you get back on your feet.
Professional indemnity and public liability insurance
If you give advice or provide professional services, Professional Indemnity Insurance guards against claims that your work caused financial losses. Solicitors, accountants, and consultants typically need this coverage, but it’s worth considering for any business that provides expertise.
Public Liability Insurance protects you if someone gets injured or their property gets damaged because of your business activities. This isn’t legally required, but it’s hard to operate without it – many clients and landlords will insist on seeing proof of coverage.
Private medical insurance for your employees
Beyond the required Employers’ Liability Insurance, you might want to consider additional protection for your employees. Private Medical Insurance can help get staff back to work quickly after illness or injury. Critical Illness coverage provides a tax-free lump sum if an employee develops a serious condition.
Some businesses also offer Life Insurance, typically paying up to four times an employee’s salary if they die while employed. This isn’t just about being generous – it helps attract and retain talented people.
Trade credit insurance and Key person insurance
Money doesn’t always flow smoothly in business. Trade Credit Insurance protects you if customers can’t pay their debts. Key Person Insurance provides financial support if someone vital to your business dies or becomes disabled. These coverages aren’t about physical assets – they’re about protecting your business’s financial health.
Getting the right coverage and the best deal – find an insurance broker
Insurance isn’t one-size-fits-all. When shopping for coverage, consider working with a broker who knows your industry. They can help tailor a package to your specific needs and often access better rates than you’d find on your own.
When you apply for coverage, you’ll need to disclose everything relevant about your business. Be thorough – hiding information or being careless with the details could invalidate your coverage when you need it most.
Most insurers will let you pay monthly rather than annually, though this usually comes with a small premium. Consider the trade-off between managing cash flow and paying a bit more overall.
Keep on top of your insurance needs and renewals. Don’t leave it to the last minute (or at all!)
Review your coverage annually, or whenever your business changes significantly. Moving premises, buying new equipment, or expanding into new activities might affect your insurance needs.
If something does go wrong, tell your insurer immediately – even if you’re not sure you’ll make a claim. They can often provide practical help beyond just paying out money. Many insurers offer 24-hour helplines and can connect you with specialists who handle disasters.
Finally, remember that managing risk goes beyond just buying insurance. Good security measures, staff training, and maintenance procedures can prevent problems and might reduce your premiums too. Your insurer can often advise on risk management – they want to help you avoid claims as much as you do.