The reasons are many that a business owner may ask the question, do I need business insurance? You may be a start up business working out which outgoings are essential in order to keep costs down, your business may have developed or moved into a new sector and you’re unsure where potential litigation risks can occur, or perhaps you’re buying an established business and you’re still learning the ropes of the responsibilities of business ownership.
The simple answer is yes, as a business owner you definitely need business insurance for your company. Business insurance protects different aspects of your business suffering losses when an unfortunate event occurs. Such events can be a claim being put against your business, from a customer, an employee or another business, or your business suffers as a result of theft or vandalism.
Safeguarding your business, whether you’ve just created it or have been running it for years, is paramount! The correct insurance really is the difference between your business thriving through difficult situations, or it experiencing insolvency or bankruptcy, meaning the end of your business journey.
So perhaps the question isn’t, ‘Do I need business insurance?’, it’s more, ‘which business insurance do I need?’
The Law
In the UK, the only business insurance that is required by law, is for any business that employs any number of staff, this is Employers Liability Insurance. This insurance covers your business if a member of staff (or their family), puts a compensation claim in against you. This claim would be for any suffering or death caused by an injury or illness inflicted upon them as a result of the work they do for your business.
There are some exemptions to this law, such as companies operating within certain sectors, or a company only having close family members as their employees. To see if your business is exempt, read a brief guide to the Employers’ Liability (Compulsory Insurance) Act 1969 from the Health and Safety Executive.
I don’t employ staff, I’m a sole trader, do I need business insurance?
Yes.
The above doesn’t mean that if your business doesn’t employ people, you don’t need any insurance, quite on the contrary, all this means is that the law isn’t forcing you to have this one type of business insurance.
There are many regulatory bodies, in many business sectors, that will only allow your business to operate if you have other insurances in place. This could mean that your business (whether you’re a sole trader or a company with many employees), could fall into financial difficulty as a result of insufficient income, due to inadequate insurances, which could cause bad reputation and a loss of future business (even when you do get the right insurances in place).
I work from home, do I need business insurance?
Yes.
If you are welcoming customers into your home, you have a risk that they may have an accident resulting in an injury whilst there. Whether they tripped over their own feet, or fell down the stairs due to their own misjudgings, if the event happened in your place of work (also your home), you are at risk of that customer claiming that the responsible party for the accident and injury is you. To cover this risk you would want to take out Public Liability Insurance. This would also be required for anyone working with the public (not just in your own home). If any damage or injury can occur due to the work you perform, whether that’s at home, the customer’s home, in a place of work, or in a public space, Public Liability Insurance is an absolute must to protect you and your business.
If you’re selling and storing products from home, then your home insurance may not be suitable to cover these items. This can also be true for any tools you use to provide a service or to create a product. Any laptops, printers or equipment you use to market and sell your products or services online are also at risk if they are not insured.
Business insurance to cover theft and damage is really important here, as a loss of earnings due to damage caused by a flood or a fire for example, or due to your equipment being damaged or stolen, could severely affect your business’ financial stability. If you are unable to replace the items quickly, you may have to refund customers on existing orders, which again would cause more financial and reputational loss, it can even potentially cause bankruptcy. Covering these items and potential situations with business insurance would prevent any financial damage to you and your business. There are many insurance types which can be specific to your business, such as contents, tool, stock and equipment cover.
My business sells services, such as advice rather than a product, do I need business insurance?
Yes.
One of the most important types of insurance available to businesses that provide advice, or handle data is Professional Indemnity Insurance. This insurance protects and covers your business in the event that a customer loses money due to the services and advice you provided, and they decide to raise a claim against you, which could amount to a hefty legal bill, especially if the claim makes it to court.
How Many Insurances?
The world of business insurance does seem to have an ever growing list of possible insurance policies you as a business owner can take out to protect your company. This is due to the vast variety of business types operating here in the UK. With such a colourful landscape of skills, products and services, there are also insurance products designed to meet your every need…which is great! Some insurance companies even offer combined insurance policies to help you manage your business’ insurances, just be careful to fully read the details of a policy to ensure their level of protection, limits of payouts and required excesses are appropriate for your needs. For Public Liability Insurance for example, some companies will only conduct business with your company if your PLI is for £10 Million. It’s important to know your customers (businesses and consumers), to ensure the policies you take out are suitable for the requirements of your work.
So, with so many unfortunate events that can take place for any business, whether you’re a one man band, a company employing 100 people, provide products that are mailed out to customers, sell services such as advice, are working in an office, online, in a field or at home, it is vital for you to have the appropriate insurance to cover any eventuality that may occur as a result of the work you do.
Having the right business insurance provides peace of mind for you and your customers. So when someone asks, ‘do I need business insurance?’ the answer is really, can you really afford to not to?