Whether you are running your own business or simply want to protect your personal assets, you will need insurance. Commercial insurance coverage is a necessity for companies as it protects both yourself, your employees and your customers. Equally, a personal insurance policy can ease the heartbreak and financial distress you might face if the worst happens to your personal property.
19.3 million households in the UK have contents insurance, covering their possessions against theft and damage. However, whilst this policy can protect domestic households, you would need a different type of contents insurance to insure a company due to the different risks associated with businesses.
Businesses deal with situations that require specialist coverage. You can’t insure your company using personal insurance policies and you also wouldn’t need business insurance for your home. Different policies will provide you with the right coverage for your everyday activities, at work or home.
In this article, we’ll take a look at the different types of cover provided with personal insurance and the insurance you will need if you run a company. We’ll also discuss how much coverage you may need and why it is an important investment.
What is the difference between personal and commercial insurance?
Personal insurance, sometimes known as personal lines insurance, is an umbrella term for different insurance policies that cover your personal property, possessions and activities such as holidays. Some types of insurance are pretty common, whereas other types of coverage are more niche.
Business owners will need to get coverage from commercial lines insurance instead, as this is specifically tailored to companies and the risks they face. The insurance will cover situations you wouldn’t find in a domestic setting, such as employees, customers, data and work-related property.
Without further ado, let’s delve into the policies offered by personal and commercial insurance.
What policies are offered with personal insurance?
The term ‘personal insurance’ covers lots of different policies. You can choose the level of coverage that you want, based on what you own and your activities. For example, car insurance is a legal requirement if you own a car. Depending on the level of cover, you will be financially protected if you are involved in an accident or your vehicle is stolen.
Some of the other popular types of personal insurance include:
- Home coverage (including contents)
- Legal expenses
- Income protection
- Pet insurance
Many people that own a second home or a property abroad choose to insure their properties with specialist home insurance. This will cover you if your houses are occasionally rented out or occupied.
Health insurance will cover the cost of your medical bills should you fall ill and need treatment. Income protection insurance will also help you if you lose income due to being unable to work or make adaptations following a disability that you or a family member develop.
Our pets can also be covered by insurance, which is helpful since medical treatment for our furry companions can be expensive.
Is personal insurance a necessity?
Although we all hope that you’ll never be in a situation that means you need to make a claim, insurance is still an important investment to make. It will act as a safety net in case something bad happens. Without insurance, you could find yourself facing expensive payouts which can put an unwanted strain on you and your family.
There are some important questions that you need to consider when deciding what insurance to buy. For example, could you afford your current lifestyle expenses if you suddenly lost your income? Are you prepared for the cost of repairing or replacing your car if it gets damaged? Would you be able to afford a new television if your current one was stolen? If the answer is no to any of these questions, then personal insurance is an essential investment.
You can update and change your personal insurance policies if your situation changes. A new property or car would need to be added to your policy to ensure that it is properly protected.
Who needs commercial insurance?
Businesses need to be insured for their everyday activities and trading. As with personal insurance, some policies are a legal requirement whilst others are up to the individual business owner. However, you may find it hard to trade if you haven’t got certain insurance policies, even if they aren’t mandatory.
Whether you are a small business or a big corporation, you will need commercial insurance. There are a number of risks that you and your company are exposed to on a regular basis, which is why you should do your best to implement the necessary insurance as a precaution.
What are the different types of commercial insurance?
Commercial insurance is an umbrella term that covers different insurance types for businesses. The insurance is tailored to suit the unique situations that businesses have to deal with, such as dealing with members of the public, managing equipment and selling products or services.
A breakdown of some of the most common commercial policies is listed below:
This policy is used to protect businesses if they are subject to compensation claims or legal costs from members of the public. This may result from an injury (or even death) that a third party suffered whilst at work or on your property. The fees may be used to cover medical expenses if a claim is made against you.
Public liability insurance will also cover you if your actions at work damage someone else’s property. For example, as a plumber, you could damage a customer’s pipes whilst repairing a sink.
This commercial insurance policy isn’t a legal requirement, but most businesses consider it essential. Some professions will find it hard to trade without public liability insurance, which can harm the overall running of the company.
Some of the occupations that invest in public liability insurance include:
- Licensed traders
- Event organisers
All businesses that employ one or more employees are legally required to have employers’ liability insurance. It will cover you if an employee is injured at work or becomes ill as a result of their work. You may be faced with medical fees or compensation claims as well as legal fees. Even businesses that aren’t found to be at fault will still have faced the cost of legal proceedings.
Businesses that fail to buy this insurance will be subject to fines of £2,500 per employee daily until you are insured. It is a legal requirement to have at least £5 million coverage, although £10 million is usually standard.
Your commercial policy must cover employees wherever they work, even if they are based at home.
Companies that solely consist of family members aren’t required to have employers’ liability insurance. Sole traders are also exempt from this insurance policy because they don’t have employees.
This type of insurance will cover you if you cause a client financial or reputational loss due to a mistake that you made while working for them. You will also be provided financial aid if you face legal action after disclosing sensitive materials or if you infringe on copyrights or other intellectual property.
Professional indemnity insurance also covers your company if an employee intentionally commits an act that damages the client’s reputation or leads to them losing business or money.
The level of cover that you can get for your company will vary between £50,000 to £5 million. It will depend on the size of your company and the type of work that you undertake. Your business contract may also specify the amount that you need to be insured for professional indemnity.
Some of the occupations that invest in professional indemnity insurance include:
Businesses that own their company’s premises will need commercial property insurance. This includes shops, restaurants and offices. You will be covered if you face unexpected repair costs that were caused by things such as:
- Burst pipes
The contents inside the building, like furniture, can also be added to your business insurance policy. Your stock will also be covered if it is damaged or stolen whilst inside of the building.
Commercial auto coverage
Many businesses rely upon their vehicles to complete work, which is why they need to be protected. It is a legal requirement to insure your cars, vans or other vehicles that your company owns and uses for work-related purposes.
You and your employees will be covered as you drive between locations. The commercial auto insurance policy will cover you if any of your vehicles are damaged in a collision, or a result of natural disasters such as fire and floods.
Commercial car insurance can be used by taxis, trucks and driving instructors.
Is commercial insurance tax deductible?
Business insurance counts as an “allowable expense” as it is solely used for the benefit of the company. This means that you can deduct the cost from your taxable profit. You will need to keep records of your insurance payments so that HMRC can consult them if they are conducting a check of your business. The policy documents will also need to be kept safe and secure.
How much personal insurance do I need?
The level of insurance that you need will depend on your lifestyle. For example, you might want to get critical illness insurance if you are concerned that your health will prevent you from working. You should also consider getting life insurance that will be enough to cover any debts (such as your mortgage) should you pass away before it is paid off.
Here at A-Plan, our experts will be happy to talk you through your insurance options and help you decide the suitable level of cover.
Both personal and commercial insurance are used to protect you if you face the worst-case scenario. However, whilst personal insurance covers your domestic assets, commercial insurance is used to protect you and your business.
Certain insurance policies are a legal requirement, such as employers’ liability and commercial auto insurance. You should also consider other areas of your personal life or business that could result in severe financial losses if something bad were to happen.