Freelancers, contractors, startups and established businesses have all come to us at some point and asked the same question: 'What insurance do I need for my business?'
There's no single answer, because all businesses are different and one size doesn't fit all. But some general rules apply - the secret being to think about your business, and no one else's.
First and foremost, you need to consider the risks your business faces. That might sound daunting, but it doesn’t necessarily mean undertaking a complicated risk assessment. More often than not, 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 the risks are, whether they’re significant enough to need insurance and, if they are, what kind of insurance covers them.
So let’s break it down a bit.
What insurance do I need for my business?
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 (justified or not), professional indemnity insurance steps in. It pays for your defence and legal costs, and covers any compensation 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) can be a complicated beast. If it's not clear exactly what you need, we recommend talking it through with one of our specialist advisers.
Public liability insurance
Do you go out and about to your clients or have people come to you? If there’s an accident like a trip, slip or spill and someone’s injured or their property’s damaged, you can be held liable.
We live in a compensation culture and, if you’re sued for bodily injury or property damage, you’ll face a big bill for legal costs and damages. Public liability insurance covers both those things.
Levels of cover usually range between £1m and £5m, although £10m cover isn’t uncommon as part of a contract’s terms. It's best to check with your clients what their expectations are.
Employers’ liability insurance
This is the only legally required business insurance. It applies to most UK companies with employees.
And that doesn't just mean staff on your payroll. It also applies to temps, part-timers, secondees, seasonal workers, work experience kids and volunteers.
If one of them 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 (HSE) has 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 as standard.
Oh, and a word of warning. If you don't have employers' liability insurance and the HSE rumbles you, it can fine you £2,500 for every day you were meant to have cover but didn't.
Office contents, buildings & property insurance
Do you have an office or studio? 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.
Depending on what you do, and how much you rely on technology or a web presence, you might want to give some serious consideration to cyber insurance too.
With debilitating cyber-attacks hitting businesses of all kinds left, right and centre, it helps get you back on your feet again quickly in the wake of an attack. It also covers legal costs and compensation if your systems are hacked and you're sued for losing people's personal data.
For many business owners, the answer to 'what insurance do I need for my business?' lies in finding a balance between need, want and budget. And bearing in mind 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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