Business insurance is there to protect your company from everyday risks. It’s an important part of running your business safely and sustainably. But once you start looking into it, you’ll realise that there are quite a few options available to you. How do you know which types of business insurance are best suited to your company?
There’s no one-size-fits-all approach to business insurance. The business insurance types that apply to your business will depend on the kind of work you do, though even companies in the same sector might opt for different coverage. And while some types of insurance are mandatory, others aren’t — but that doesn’t mean that you shouldn’t consider them as you weigh up your options.
Let’s explore this in a bit more detail.
What is Business Insurance?
Business insurance — sometimes called commercial insurance — offers protection against unexpected problems in your business. These could include financial loss, damage to your premises or inventory, theft, illness or injury, legal fees, or compensation you might be required to pay.
Choosing the right type of insurance can feel a little overwhelming. There are a lot of options out there. (We’ll explore them in a minute.) As a result, it’s often a good idea to enlist the help of an experienced broker. They’ll help you assess which insurance policies are best suited to your needs.
What are the 3 most important types of business insurance?
While there are a number of different types of business insurance, there are three primary policies you should be aware of:
- Employers’ liability insurance
- Public liability insurance
- Professional indemnity insurance
Employers’ liability insurance
If you employ people, employers’ liability insurance isn’t optional. You have to have it in place. It’s a legal requirement, even if you only hire a few people.
Employer’s liability insurance protects your employees if they get sick or become injured through work. These could range from relatively minor problems that can easily be solved, to major issues that could affect your employees’ ability to work on a temporary or permanent basis.
Even if you pride yourself on having the most stringent health and safety policies in place, it’s important to remember that accidents happen. Employers’ liability insurance takes care of the medical bills involved, and if necessary, any compensation and legal costs, too. The legal costs can be especially heavy if the case ends up in court.
Public liability insurance
As the name suggests, public liability insurance protects you from any claims that members of the public make against you for injury or damage they suffer as a result of your business activities. The people concerned could include clients, visitors, or ordinary members of the public who have no direct relationship with your company.
This insurance could be useful if someone slips on a wet floor while visiting your offices, or if their car is damaged from falling debris at your construction site. In these instances, your public liability insurance would cover the legal fees and any costs you might incur.
Public liability insurance isn’t mandatory, but if you regularly deal with the public, it’s worth considering. If you don’t have it in place, you could be hit with crippling fees.
Professional indemnity insurance
Professional indemnity insurance (which is also known as PI or professional liability insurance) covers the legal costs of someone taking you to court because they consider your work unsatisfactory.
PI can help to protect you against cases of bodily injury (only if this is proven to be as a result of negligence, rather than an accident), consequential loss, defamation, confidentiality breaches, and intellectual property.
While PI isn’t necessarily mandatory, some sectors, such as accounting, consultancy, engineering and healthcare, are required to have it in place because they belong to certain regulatory bodies.
What are the most common types of business insurance?
The three types of business insurance mentioned above are just the start. There are many other options available to you. Read through the choices below and consider if they apply to your business. Are you likely to need this sort of coverage? Could you stomach the cost it covers if you had to pay for it yourself?
Business assets insurance
The damage and theft of all equipment, tools, furniture, and other assets on your business premises can be protected under business assets insurance. It might include cash as well, though this would depend on your policy.
Business interruption insurance
Fires, floods, and other disasters — even severe theft — can bring your business to a standstill. If your business has to stop working completely for a period of time while you replace or restore parts of your premises or stock, business interruption insurance will protect you against this loss of income.
Business property insurance
Everyone needs somewhere to work — even if it’s just a kitchen table. Business property insurance protects your workspace, whether it’s a large commercial property, a block of flats you manage, or your home office.
Business vehicle insurance
Like employer’s liability insurance, this one’s non-negotiable. If your business owns company cars, these cars have to be insured under a business vehicle insurance policy. Once again, different types of cover are available for different vehicles. You might just need insurance for a few cars your executives use or, if you run a courier or haulage company, you might need comprehensive fleet van insurance.
Credit risk insurance
Dealing with debtors can be difficult. Fortunately, credit risk insurance will cover you for the losses you experience if someone refuses to pay a debt.
Cyber-risk insurance
A 2023 study by the UK Government found that 26% of medium-sized businesses, 37% of large businesses and 25% of high-income charities fell prey to cybercrime in a 12-month period. Cyber-risk insurance can help to protect you from hackers and scammers who want to access your data.
Directors’ and officers’ insurance
This insurance covers directors or officers against any claims made against them in their role as senior members of the company. These sorts of claims usually refer to alleged wrongful acts, like a breach of trust or duty, neglect, error, or wrongful trading. It’s also known as management liability insurance.
Equipment breakdown insurance
Could your business carry on working if some of your equipment failed? If you work in manufacturing and construction, this question has likely kept you up at night more than once. Equipment breakdown insurance protects you against unexpected mechanical failure, so that you can get back on track in no time.
Key person insurance
If your company has a particularly valuable employee, you might want to insure them under key person insurance. This type of insurance covers you if they get sick or injured, or in the event of their death.
Product liability insurance
Product liability insurance covers your company in the event that a product you produce causes injury or damage. In 2017, it helped to protect an e-cigarette producer after a battery exploded in a customer’s pocket, causing him permanent disability. With its product liability insurance, the company was able to cover the customer’s related medical fees, both at the time of the incident and on an ongoing basis.
Package business insurance
Package business insurance policies are designed to protect businesses operating in certain sectors. Pub and nightclub owners, for example, will require different coverage than hotels, retail shops, breweries, and factories.
Quickfire summary
There are many different business insurance types. Which ones you choose will depend on your industry, your business, and your personal preferences. Of course, you have to comply with mandatory insurance, like employers’ liability insurance (if you employ people) and business vehicle insurance (if you have company vehicles). The rest are up to you.
Choosing from the many options available can be a little overwhelming. To make sure you’re fully covered, speak to an experienced broker. They’ll help you to assess your greatest risks and protect you against them.
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