Navigating through business insurances can be challenging. In the below article we list the most useful ones.
Navigating the world of small business ownership is tricky enough on its own. You need to set up payment accounts, fine-tune your product or service, source your suppliers, and consider hefty decisions for taxes, accounting, and even ownership purposes. Now that you’ve dotted your “i's” and crossed each “t,” you’re ready to open up shop. But what if you’ve missed something important? Business insurance has you covered. Depending on your specific business designation, you could need anything ranging from public liability cover to cybercrimes insurance. Below, we explore your options.
If you’re wondering what types of businesses need some level of insurance, the short answer is “all of them.” From covering cashiers to property, labourers and more, you need adequate coverage to indemnify your business in any possible catastrophe that may arise. If your business interacts with people—which it must, if you intend to make income, you need insurance to protect against a lawsuit. Businesses providing simple services such as cleaning or dog walking are likely to require minimal coverage. Still, the rate goes up for foodservice establishments, medical practitioners, and those operating in otherwise “higher risk” fields. In addition to protection from lawsuits, you may also need insurance to protect your material assets, such as real estate or intellectual property.
Public liability insurance, sometimes called “PL insurance”, is advisable for any business interacting with the public. While it is not required by law in most cases, it can provide much-needed protection for your business. PL insurance covers any event wherein a member of the public claims your business has caused personal injury or property damage and typically handles legal and settlement costs to indemnify the injured party.
The average annual cost for standard PL insurance in the U.K. runs about £118 for small businesses but can be significantly higher for those operating in high-risk fields. Public injury claims in the U.K. can cost upwards of £100,000 in some extreme cases, though most fall between £10,000 - £20,000. These expenses are devastating to small businesses working with tight margins regardless of the cost.
PL insurance covers various potential hazards, and most businesses need to consider purchasing coverage in the 1 - 5 million pound range.
Public liability insurance covers builders, retail owners, restaurants, and everyone in between. Suppose you own or lease property that the public can access. In that case, PL insurance will indemnify your business if someone is injured on the property due to your business activities.
If you own a retail establishment, for example, and someone slips in water that has been tracked across the floor and injures him or herself, they could potentially sue your business for not ensuring a reasonably safe shopping environment. Hairdressers could be sued for knicks or infections that result in injury, and even tutoring companies could be held liable for psychological damages if a student claims improper instruction. In all of these cases, PL insurance has you covered.
On the higher end of the spectrum, businesses such as tradespeople and builders take on an elevated level of public liability risk. One of your labourers could make a simple mistake, such as knicking a water line or damaging a structural component, that results in millions of pounds worth of property damage. Even barring these mistakes, delays could cause your clients to lose money, leaving you on the hook for “lost time” damages to their business. In either case, having an appropriate amount of PL coverage will protect your business from severe loss.
For small businesses, the cost of PL insurance can range anywhere from £50 up to £500 or more per year, depending upon your profession and the coverage needed.
Clothing and craft retailers, cafes, and simple service providers such as cleaners, dog walkers, and instructors can get by with minimal coverage, given that damages in these industries are typically limited. Coverage amounts in the £1 -2 M ballpark are enough to indemnify you in these circumstances. For high-risk small businesses including builders, transportation operations, and event planners such as race organisers, a higher coverage limit is advisable. While the annual cost for this insurance coverage can, at times, exceed £500, the expenses incurred for coverage are far lower than the devastating possibility of a multimillion-pound lawsuit for property damage down the line. Coverage up to £5 M will take care of almost any serious PL suit for small businesses.
Unlike PL insurance, employers’ liability insurance is required for most businesses with a workforce. Employers’ liability insurance covers the costs for you and your employees should a loss be incurred. This includes injury or illnesses your employees incur as a result of working for you, such as if they trip and fall on duty, but also covers your employees as a third party if they should cause injury to the public in the line of their work.
For example, if one of your servers spills a hot beverage on a customer and the customer brings a suit against the employee, your employers’ liability coverage kicks in to cover that employee as a third party. It also covers accidental property damage by your employees while working. If you operate a cleaning service, and one of your employees accidentally uses the wrong solution on a surface and damages it, your employee and company will be covered.
While this insurance is mandatory for almost all U.K. employers, it’s worth shopping around to find the best coverage available for the cost. Employers’ liability coverage typically ranges from £60 - £200 per employee annually, for most businesses. It can change depending upon the type of employee and their level of risk and may be slightly higher for extremely high-risk employees, such as underwater welding professionals.
The minimum required level of coverage depends on your industry, but it is typically considered “per employee,” meaning that more employees will mean a higher coverage rate. For example, if you must be covered for £100,000 per employee, and you have six employees, you are required to carry £600,000 worth of employers’ liability coverage.
The above is an example, and minimum coverage will range from relatively low costs for a cashier to relatively high costs for labourers. General records of workplace safety can also impact your rates—if multiple employees have made claims against your business in the past, you’ll face higher premiums thanks to a record of creating an unsafe working environment.
If you do not carry this coverage, you risk losing your business licence in addition to facing fines of up £2,500 per employee and per day.
Outside of employers’ liability and public liability coverage, your industry may require additional, specialised coverage to indemnify you in case of loss. There are many types of specialised coverage, and you should speak with an insurance professional to better understand the exact needs of your business.
Some industries require specialised insurance by law, while others are optional but advisable. Not all optional insurances are listed below, but some of the most common ones for small businesses include portable equipment, cyber liability, and commercial vehicle insurances.
Given the increasing shift toward remote work, many businesses have portable assets that need to be protected. Including laptops, tablets, smartphones, and even tools your crew may use in the field, equipment that can be taken off of your business premises will need to be insured separately. This isn’t mandatory insurance but can cover you for loss if your equipment is damaged, lost, or stolen.
Cyber liability insurance, sometimes called cybercrimes insurance, covers losses resulting from malicious players against your company network and systems. Cybercrimes can include phishing emails designed to give hackers access to your intranet and sensitive information, or even ransomware. Ransomware is an especially costly type of cyberattack, as it involves encrypting your vital data and forcing your company to pay to have it returned.
Data breaches and leaks are also sometimes covered under cyber liability insurance, but different policies may choose to include this or not.
Overall, cyber liability insurance covers you in the event of an attack up to your coverage limit. This can include legal costs from claims brought on by data leaks, your legal fees to bring hackers to court, or any recovery fees from systems damage.
If your small business includes the use of a commercial vehicle, such as for deliveries or transporting staff to worksites, you will need commercial vehicle insurance. This may be one of the most expensive insurance requirements for a small business but is legally required in most cases. Commercial vehicle coverage is typically higher than personal coverage as well—running around £2,000 per vehicle or more. Influencing factors for vehicle price include the vehicle value, number of drivers, and typical distance you intend to operate the vehicle.
There is a range of insurance options available for small businesses to choose from, and which are right for your business will depend upon the needs and budget of your business. While employers’ liability insurance is absolutely mandatory if you have any employees—even temporary ones—the rest is mostly decided by your specific situation. PE insurance is highly advisable for anyone operating in contact with the public.
Ultimately, speaking with an insurance professional regarding your needs is the best way to select the insurance best for your business and budget.