Basics of business insurance

1. Employer’s Liability Insurance
By law, every business in the UK that employs anyone outside of immediate family must have employer’s liability insurance cover.

If you run a business, it is your responsibility to safeguard the wellbeing of your employees and other people who work for you. Your employees may be injured at work or become ill as a result of their work and if they do, they have the right to claim compensation from you if they think that it is your fault for not providing a safe work environment and doing everything you can to protect their wellbeing.

Employer’s Liability Insurance covers you for the cost of any successful claim made against you or your business, as well as any costs incurred in the defence of the claim (for example legal fees).

The minimum amount of cover required under UK law is £5 million but its worthwhile taking out the highest level of cover you can afford as this can quickly disappear in payouts and legal fees.

As an employee, it is your right to work in an environment where your wellbeing is protected. If your employer does not have employer’s liability insurance, they can be fined up to £2,500 per day that the cover is not in place.

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2. Public Liability Insurance
Public Liability Insurance covers you for any damages that a member of the public may be awarded as a result of personal injury or damage to their property caused by your business. It also covers legal fees and other expenses to do with defending any claim.

It is impossible to eliminate all the risks of running a business. However, the law states that if you injure someone or cause damage to property then you will have to pay a certain amount of ‘damages’ to compensate them which, in the worst case scenario, could run to many millions of pounds.

These payouts could bankrupt your business and leave you in serious debt so while Public Liability Insurance is not a legal requirement, some types of businesses such as riding schools, instructors and any business working in somebody else’s property would be well advised to get covered.

The knowledge that your business is protected against any unforeseen events will also give you the confidence to concentrate on the running of your business, rather than concerning yourself with what might happen and “worst case scenarios”, and remember – some potential customers may refuse to deal with you unless you have adequate insurance cover.

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3. Office & Contents Insurance
Many standard Office Insurance policies will include both Employer’s Liability and Public Liability insurance in their schemes but there are a number of other reasons that a small business might need more specific cover.

Whether your business operates from an office of its own, a shared office or from your own home, the business premises will need to be insured against any damage such as fire, vandalism, subsidence and so on. Most Office Insurance policies also offer optional cover for

• Office contents, including computers, photocopiers, phones, business machines and furniture;
• Business interruption, whereby the costs incurred in the event of something happening are covered by the insurance company; and
• Loss of money to protect any cash that might have been held on the premises.

For most small businesses, Office Insurance is the minimum requirement for insurance cover as most standard policies will cover you and your property against the most common insurance claims raised against small businesses but it’s important to seek legal guidance to ensure that your business is properly insured.

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4. Professional Indemnity Insurance
Professional Indemnity Insurance covers you or your company against claims made as a result of negligent or incorrect professional advice or services that your business may provide. It also covers you for any legal costs associated with the defending of any claim.

Although not required by law, professional indemnity insurance cover is often compulsory if you want to become a member of your trade association and many clients refuse to deal with firms that do not have adequate levels of professional indemnity insurance to cover any compensation claims that may arise.

There are many different professions which would benefit from professional indemnity cover, including accountants, IT contractors, management consultants, financial advisors, surveyors and homeopaths.