What business insurance do I need?

We’ll take you through it, cover to cover.

Starting a new business comes with a long list of questions. What business insurance do I need? is up there with the most important. Having the right coverage in place will ensure that you have the protection you need if anything goes wrong and that you’re compliant. Read on to find out more.

When it comes to getting insurance for a new business, it can be hard to know where to start. But it doesn’t have to be complicated. The first question that may spring to mind is: do I need business insurance? Here’s the lowdown.

Do you need business insurance?

It’s a legal requirement to have insurance in place if you hire others. You can face hefty fines if you don’t get the proper coverage in place. (We’ll explore the insurance options for people who are self-employed in a minute.)

Next question: What insurance do I need for my business?

What insurance is mandatory for businesses in the UK?

The insurance that applies to your business — and which insurance is mandatory — will depend on how your business is structured and the kind of work you do.

Employers’ liability insurance

If you own a business in the UK that employs people, it is mandatory to have employers’ liability insurance

The purpose of employers’ liability insurance is to protect you and your employees if anyone gets injured or ill working for you. It can help you pay any costs or compensation that might be due.

Your employers’ liability policy must:

  • Be issued by an authorised insurer 
  • Cover you for at least £5 million

If you don’t have employers’ liability that ticks these boxes, you could be fined £2,500 for every day you’re not properly insured. With penalties like that, it’s best to ensure that you have the right coverage in place. 

You may not need employers’ liability insurance if your employees aren’t in the UK or if you only employ a member of your family, but it’s always best to check to ensure that you stay compliant. (Howden is here to help if you need us.)

Business car or commercial vehicle insurance

You need to have business car insurance if you use any vehicles for business purposes. This may include driving to visit clients, between different business locations, or to make deliveries. It’s not necessary to have business car insurance if you only use your vehicle to commute to and from work. 

Commercial vehicle insurance is also necessary if transportation is the cornerstone of your business. For example, if you’re a courier company or you ferry passengers from one place to another, you must have this type of insurance in place. 

You can incur fines and penalty points if you or your employees are caught driving without the proper insurance, so it’s best to have the right coverage. 

While employers’ liability and vehicle insurance are the only kinds of coverage that might be mandatory for your business, having other insurance policies in place is advisable. The right coverage can help protect you against accidents and loss should unforeseen events occur. 

Policies to look into include:

  • Public liability insurance
  • Professional indemnity insurance
  • Directors’ and officers’ liability insurance 
  • Contents and portable equipment insurance
  • Cyber liability insurance

We’ll take you through the details of each.

Public liability insurance

Public liability insurance covers you if someone makes a claim against you, either because they have been injured or their property has been damaged due to activities related to your business. 

It’s definitely not something we want to think about when we start a new business but accidents happen. Not having public liability insurance in place may mean you have to pay large sums in compensation and legal fees if something unforeseen occurs.

While it’s an important policy type for businesses of all shapes and sizes, it’s especially advised if your business involves:

  • Hosting members of the public on your premises
  • Working on other people’s premises, such as performing home renovations or installations
  • Operating from remote locations, such as pop-up stores, markets, or event spaces

While public liability insurance isn’t mandatory in the UK from a legal standpoint, your clients and suppliers may ask for proof of it before deciding to do business with you. 

Professional indemnity insurance 

Professional indemnity insurance is for businesses that provide advice, knowledge or professional services, such as accountancy, law, and architecture firms, and financial advisers. You may also want to take out professional indemnity insurance if your business offers advertising, design, or public relations services. 

PI protects you financially if someone makes a compensation claim against you, alleging that you provided negligent or damaging advice or services. 

Directors’ and officers’ liability insurance 

Also known as management liability insurance, directors’ and officers’ insurance protects the leaders of companies should any claims be made against them as individuals. 

Directors’ and officers’ insurance will help you with legal fees and compensation payments if you fall into trouble with things like:

  • Financial reporting
  • Managing pension schemes
  • Health and safety standards
  • Breaching the trust of clients or employees
  • Generating pollution
  • Insolvency 

Some directors’ and officers’ insurance also helps you deal with the PR costs that can come with helping you repair your reputation. 

As a director, manager and/or founder of a business, it’s worth giving this type of cover serious consideration. If not, you could find yourself in a situation where company woes become personal woes. Some investors in new companies may also ask if you have directors’ and officers’ insurance in place before they decide whether to invest.

Contents and portable equipment insurance 

Just as you would insure the precious contents of your home, it’s vital to insure your company’s contents from loss or damage. Fire, floods and theft happen — and they can be crippling for a business when they do. 

Contents insurance is loosely divided into:

  • Standard contents insurance, which includes cover for everything in your offices and business
  • Portable contents insurance, which covers items that you carry around with you, such as portable devices, laptops and cameras

Cyber liability insurance

Cyber liability insurance helps to protect you from the risk of cyberattacks and data breaches — and is becoming increasingly necessary for businesses to have on their insurance docket. It will help you cover legal claims and compensation costs. 

In some cases, cyber liability insurance may help you cover fines from the General Data Protection Regulation (GDPR). This regulation guides the rules for using personal data. However, it’s important to note that fines issued by the GDPR are not all insurable — so it’s best to check in with your advisor on this one.

Read more: Types of Business Insurance You Should Know About

Do you need business insurance if you are self-employed?

If you’re self-employed, having the right insurance in place is not only about avoiding government fines. You may need:

  • Public liability insurance, if you interact with customers or clients
  • Professional indemnity insurance, if your business involves giving advice, transferring knowledge or providing a professional service
  • Contents and portable equipment insurance so that your important goods are protected
  • Cyber liability insurance, if your work involves handling other people’s data

You may also want to look into getting:

  • Credit insurance, which will help you out if a client is unable to pay what they owe you

It can be tricky to navigate the road of business insurance alone. If it’s time to get your coverage in place, get in touch. We’ll simplify the process and ensure you get the protection your business needs. 

Quickfire summary

The types of business insurance you need to stay compliant are:

  • Business car and commercial vehicle insurance, if you use any vehicles as part of the operations of your business

Depending on the type of business you have, you may want to consider other policy types to prevent you from suffering major losses if an unforeseen event occurs. 

Coverage to look into includes:

  • Public liability insurance
  • Professional indemnity insurance
  • Directors’ and officers’ liability insurance 
  • Contents and portable equipment insurance
  • Cyber liability insurance

Because all businesses have different requirements, there’s no one-size-fits-all when it comes to putting together an insurance package. The first port of call is to speak to a professional insurance provider so that they can assess your specific needs and tailor-make a package that’s right for you.

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