Freelancers, contractors, startups and established businesses have all come to us at some point and asked the same question: what insurance do I need?
It’s one of the most common questions we’re asked – and the one most likely to result in a lengthy phone call.
The problem is that there’s no one-size-fits-all answer. We can’t give definitives because every business is different and needs different things (which we know doesn’t help you much).
But, we also know that you don’t want to waste valuable time trawling through websites and forums trying to find out; you just want someone to tell you the basics.
Well, let’s see if we can do just that.
Start at the beginning
First of all, you need to consider the risks your business faces. This doesn’t necessarily mean undertaking a protracted risk assessment; just focusing on the basics is enough to get you started.
Think about: what you do, where you do it, who you do it with and what you use to do it.
It’s possible that, for you, any and all of these considerations carry a potential risk. But don’t be too concerned about that. You just have to identify what they are, whether they’re significant enough to need insurance and, if they are, what insurance covers them. (Welcome to the world of underwriting, by the way.)
So let’s break it down a bit.
The risk: what you do
What covers it: professional indemnity insurance
Your business activity, your occupation, your profession, your expertise. It’s what your clients pay you for: the specialist advice or service you provide.
That’s great of course, but what if a client alleges you’ve made a mistake and it’s cost them money? Or simply that you’ve not done what they paid you to do?
If you need to defend yourself against aggrieved clients’ allegations of wrongdoing (with or without foundation), professional indemnity insurance pays for your defence and any compensation or rectification costs you’re liable for.
Depending on what you do, levels of cover usually range from around £100,000 to £5m, but can be higher depending on your individual client’s demands and the nature of the work you’re undertaking.
Professional indemnity insurance (sometimes called professional liability insurance) is a complicated beast. If you’re not clear on exactly what you need, we recommend talking it through with a specialist broker (like us).
The risk: where you do it
What covers it: public liability insurance
Do you go out and about to your clients or have visitors to your premises? If there’s an accident (and it’s your fault) and someone’s injured or their property’s damaged as a result, you can be held liable.
Consequently, if you’re sued for bodily injury or property damage, you’ll face a big bill for legal costs and compensation. Public liability insurance covers both those things.
Levels of cover usually range between £1m and £5m. A £10m level of cover isn’t uncommon, particularly as part of a generic contract’s terms. Check this amount with your client if they ask for it – it can cost you a fair bit.
The risk: who you do it with
What covers it: employers’ liability insurance
The only legally required business insurance. It applies to the majority of UK companies with employees.
If one of your staff is injured or becomes ill whilst working for you, and they deem it’s your fault, they can sue you for damages. Employers’ liability insurance pays for your legal defence and any compensation due to your employee.
Because employers’ liability insurance is a legal requirement, it’s a good idea to find out for certain if your business needs it. The Health and Safety Executive have a definitive guide for employers; it’s an easy read and should tell you everything you need to know.
Minimum level of cover for employers’ liability is £5m but you’ll find that most insurers and brokers (including us) only offer £10m.
The risk: what you use to do it
What covers it: office contents, buildings and property insurance
Do you have an office? With a computer, phone, desk, plants etc in it? Do you take equipment out and about with you (such as a laptop, projector, mobile and so on)?
We all know what a pain a damaged or stolen laptop can be. Inconvenience is one thing; not being able to run your business is another. If you’ve invested money in your premises and your business equipment, we’d suggest it makes perfect sense to protect it.
Levels of cover are up to you. Think about how much it would cost you to replace everything in your office or workspace, worst case scenario, and that’s a good place to start. (And we mean everything – right down to the last pencil.)
Tip of the iceberg
What we’ve described here isn’t all that’s available, of course, but it’s enough to get you started and should cover the kind of ‘everyday’ risks most businesses face.
Insurance is always a difficult purchase and, for many business owners it’s a toss up between need, want and budget. You can insure pretty much anything these days – where you draw the line is up to you.
At least now you’ll know where the line starts.