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What business insurance do I need?

24 May 2013

Question time

Freelancers, contractors, startups and established businesses have all come to us at some point and asked the same question: what business insurance do I need?

First, you need to consider the risks your business faces. This doesn’t necessarily mean undertaking a complicated risk assessment; just focusing on the basics is enough.

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.

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 says you’ve made a mistake and it’s cost them money? Or that you’ve not done what they paid you to do?

If you need to defend yourself against clients’ allegations of wrongdoing (with or without foundation), professional indemnity insurance steps in. It 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 client’s demands and the nature of the work.

Professional indemnity insurance (sometimes called professional liability insurance) is a complicated beast. If it’s not clear exactly what you need, we recommend talking it through with your broker.

The risk: where you do it

What covers it: public liability insurance

Do you go out and about to your clients or have people come to you? If there’s an accident that’s your fault, and someone’s injured or their property’s damaged, you can be held liable.

And, 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. £10m cover isn’t uncommon as part of a contract’s terms. Check with your client if they ask for it – it can cost 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 most UK companies with employees.

If one of your staff is injured or becomes ill while working for you, and they reckon it’s your fault, they can sue you for damages. Employers’ liability insurance pays for your legal defence and compensates 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 employers’ liability level of cover is £5m but you’ll find that most insurers and brokers 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, but not being able to run your business is another. If you’ve invested money in your office 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. There’s enough here to cover the kind of ‘everyday’ risks most businesses face.

Insurance is always irksome and, for many business owners the question ‘what business insurance do I need?’ is actually 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.

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  1. Avatar for Blair Pucknell Blair Pucknell says:

    I am starting a Bridal business initially from home in Kent. What insurances do I need please:-

    Public Liability?
    Professional Indemnity?

    Looking at keeping it as cheap as possible to start please.


    • Avatar for admin admin says:

      Hi Blair

      Depends what sort of bridal business you mean. If it’s a shop selling dresses etc then public liability and stock/equipment cover is a must. Unfortunately we won’t be able to help if it is a shop (we can’t cover retail activities or premises).

      If you’re offering more of a wedding planning service then professional indemnity is a good idea (in case your service fails to deliver and your clients decide to claim compensation from you), and public liability for when you go out and about to see your clients. This is more like the kind of business we can cover – your best bet is to talk it through with one of the team. Give us a call on 0845 872 5080, or book a call and we’ll get back to you.

      Hope that helps.

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