Insurance Cover for Business
Business insurance can help protect you and your business from everyday risks, such as accidental damage, flood, theft or legal costs. It can also demonstrate your credibility to potential customers and employees, as well as give you confidence that your business is protected.
It’s essential to consider the risks your business may face and take out appropriate insurance cover. Some types of business insurance are required by law, while others are sensible to have depending on your business activities.
In this guide, we take a look at the main types of insurance available to protect your business.
Employers’ liability insurance
Employers’ liability insurance is mandatory for most employers to cover costs arising from compensation claims by workers who suffer illness or injury as a result of their work activity. The minimum legal level of insurance cover is £5 million.
Business vehicle insurance
All vehicles that you use for business purposes must, by law, be covered by third-party motor insurance under a policy that includes business use. You also have a legal obligation to check that any employees who use their own vehicles for business purposes have the required insurance cover.
Public liability insurance
Public liability insurance covers the cost of claims made by members of the public, customers and suppliers for incidents that occur as a result of your business activities. It covers the cost of compensation for personal injuries, death, loss of property or damage to property.
Public liability insurance is not mandatory unless you offer horse riding to members of the public. However, it’s sensible to have this insurance if your business has contact with members of the public, or you visit clients or suppliers at their property.
Product liability insurance
Suppose someone suffers injury or damage to property as a result of a fault in one of your products. In that case, they can claim compensation from the producer. Product liability insurance covers the cost of such claims.
Professional indemnity insurance
Professional indemnity insurance covers the cost of claims made by anyone who has suffered loss or damage as a result of negligent advice or services supplied by your business. For some professions, such as architects and chartered surveyors, this type of insurance is compulsory.
Legal expenses insurance
Legal expenses insurance covers the cost of pursuing legal action or defending cases brought by others against your business. This type of insurance can be taken out ‘before the event’, in case any future legal action should arise. You can also take it out ‘after the event’ if your business is already involved in legal action.
Buildings insurance covers the cost of repairing or rebuilding your business premises if they are damaged. It covers risks such as flooding, fire, storms, subsidence and riot. However, it doesn’t cover general wear and tear. You should insure your business premises for the amount it would cost to rebuild them, rather than for their market value.
Contents insurance pays the cost of theft of or damage to business stock or equipment. It’s not legally required, but it’s essential for any business that holds stock or expensive equipment. You should insure stock for the amount it costs to purchase it, not for its sale price.
Business interruption insurance
Business interruption insurance covers loss of income when an unforeseen event means that your business can’t trade as usual. It will compensate you for shortfalls in pre-tax profit and any increased business costs that arise from the interruption.
Cyber insurance protects your business against loss of income or reputation caused by cybercrime or by damage to computers or computer networks. If your business uses information technology, you will require some level of cyber insurance cover.
Goods-in-transit insurance pays out when goods are lost, stolen or damaged while they are being transported. When choosing a policy, you should look out for any maximum limit of cover for each vehicle, and make sure it meets your business’s needs.
Suppose your business regularly handles large amounts of cash. In that case, it’s a good idea to take out insurance cover against loss of money. Money insurance is often part of a commercial insurance package.
Some insurers offer commercial insurance packages that include a range of policies. The packages can often be tailored to the needs of your business.
Trade credit insurance
Trade credit insurance provides cover for your business when trade customers fail to pay or don’t pay on time. It pays out a percentage of outstanding debt (usually about 90%) when a customer of the insured business is either declared insolvent or continues to default on payment longer than a period specified in the policy.
Loss-of-licence insurance covers your business against financial losses resulting from the loss of a licence to sell alcohol. It’s a good idea to consider this type of cover if you run a business that is dependent on the sale of alcohol.
Key person insurance
Key person insurance provides cover in the event of the death or serious illness of an individual who is so crucial to the operation of your business that it would suffer significantly from their absence. For instance, this could be due to a fall in sales and profits, or because the workloads for remaining staff would dramatically increase.
Directors’ and officers’ liability insurance
Directors’ and officers’ liability (D&O) insurance covers the costs of defending company directors and key managers against charges that they have committed wrongful acts. For instance, allegations of wrongful trading or neglect. D&O insurance does not cover claims against your business or company as a whole.
Income protection insurance
If you are a business owner or self-employed, income protection insurance will pay you an income if you can’t trade due to an accident or serious illness.
An insurance broker can you help you identify the best policy to suit your needs. The British Insurance Brokers’ Association (BIBA) provides a directory of brokers and types of policies for business.
DISCLAIMER While all reasonable efforts have been made, the publisher makes no warranties that this information is accurate and up-to-date and will not be responsible for any errors or omissions in the information nor any consequences of any errors or omissions. Professional advice should be sought where appropriate.
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