Business Insurance

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Business insurance is designed to protect your business against all manner of risks and potential financial losses. Finding the best business insurance for you, at the right price, is the key.

What is business insurance?

Business insurance is an umbrella term for all the types of insurance that provide financial protection for your business.
There are many different risks a business can face, such as damage to property, stolen stock, injuries to employees or customers, loss of income and negligence claims.

Different types of business insurance cover all of these, but you can usually buy your business insurance as a package, where you pay one premium for a number of policies.

How does business insurance work?

In general, business insurance is designed to help cover legal fees, financial loss and compensation costs that your business might face. You can either coordinate your insurance through a business insurance broker or go directly to an insurer.

The cost of insurance is known as a premium, which you’ll pay either monthly or annually. If your business is affected by an event covered by your insurance, you can make a claim for a payout.

If there is an excess on your policy, you’ll have to pay that amount towards any claim. Your insurer will cover the rest.

Do I need business insurance?

Without business insurance, your business would have to cover the cost if the unexpected happens. That might be repairing damage to buildings, replacing equipment or stock, or legal and compensation costs for a personal injury claim. Depending on the kind of policies you choose, business insurance can protect you from these costs, up to a maximum limit.

For some businesses, there might be a legal requirement to have certain types of business insurance in place. For instance, if you employ anyone in the UK who isn’t an immediate family member, you must have employers’ liability insurance.

Some professional and trade bodies might also require certain cover is in place in order to become a member. Having business insurance can also help demonstrate to clients and customers that you’re a trustworthy, credible business.

What are the main types of business insurance?

Different businesses need or can benefit from different types of business insurance cover. While you’ll normally tailor your cover to your particular business, there are three core types of business insurance that form the basis of most policies.

Public liability insurance

Can cover you if a member of the public gets injured, ill or dies, or if their property is lost or damaged, because of your work.
Professional indemnity insurance

Designed to cover legal fees and compensation costs if a client makes a negligence claim against you because they believe they lost money as a result of your advice or services.
Employers’ liability insurance

Provides cover for compensation and legal costs if one of your employees is injured, falls ill or, depending on the policy, dies because of work they did for you. Employers’ liability insurance is a legal requirement if you have employees (with a few exceptions).

Other types of business insurance you might want to consider

Depending on the nature of your business, and the industry you’re in, you might also benefit from:

Product liability insurance: designed to pay out if a product you supplied, whether you manufactured it or not, makes someone ill or injures them.
Business contents insurance: covers the cost of repairing or replacing equipment stored on your company premises if it is stolen, damaged or destroyed in an event such as a fire or flood. Stock kept on your premises can also be included in the cover.
Business equipment insurance: protects the essential day-to-day kit you use in the course of your business, potentially including paying for replacements if the moveable equipment you rely on is stolen, lost or damaged.
Tool insurance: covers the cost of replacement tools if you work in a manual trade and they are stolen from a secure location, such as a locked garage or van. It may also cover damage or loss.
Commercial buildings insurance: covers the cost of repairing your business premises in the result of damage by events like fires, floods or storms.
Personal accident cover: offers weekly payments to make up for your lost income if injury, either at work or outside the workplace, stops you or a key person (named on the policy) from working. Some policies may pay you a lump sum for permanent disability or a lump sum to your beneficiaries if you were to die as a result of an accident.
Business interruption insurance: covers some of the potential shortfall in lost gross profit if your business can’t trade for an extended period of time because of an unexpected event, such as a fire or flood.
Legal expenses insurance: covers legal fees when contesting a claim in court.
Business car or van insurance: you need specific business car insurance or commercial van insurance if you use a car or van for business purposes.
Cyber insurance: designed to cover the cost of making things right and compensating customers affected by a data breach at your company or if your IT systems are subject to a cyber attack.
Directors and Officers insurance: can cover claims made against the directors and officers of your company for ‘wrongful acts’, such as breaches of duty and neglect.
Run off insurance: extends professional indemnity cover to protect you from negligence claims based on events in the past, after winding down a business.
Business travel insurance: provides cover similar to personal travel insurance if you have to travel for work – either domestically or overseas.
Income protection insurance: covers a portion of your income if you’re unable to work because of illness or injury.

What does business insurance cover?

While the exact cover provided will depend on the type of business insurance policy you take out, generally it’s possible to protect against:

Injury or death caused by your business
Damage caused by your business
Sickness or injury suffered by your employees
Damage and theft of your business’s property and equipment
Loss and damage to the property of third parties
Your business operations being interrupted

Whichever policy you take out, be sure to check exactly what cover is provided and make sure you fully understand the policy before you sign on the dotted line.

Insurers set strict terms and exclusions, so be clear about what cover is included before you take out a policy. This includes the maximum amount they will pay out for a claim or per policy (limits of indemnity) and any excess you will pay on a claim.

When it comes to choosing the level of cover, try to work out your maximum exposure in the event that something goes wrong, and make sure you’re covered for at least that amount.

Business owner insight

“Business insurance is the last thing I would have thought about when I started out, so I only got it three years ago when I started working with a new client. I’m now fully insured – I ticked every box! Someone recently tried to sue me because they changed their mind halfway through a job and wanted their money back. The case was thrown out, but it takes away some stress and gives me peace of mind to know that the insurance is there if I need it.”
Cheryl Laidlaw, founder of Reyl Design Group

What level of business insurance do I need?

The combination of policies you need will depend on your business. For non-compulsory cover, the premiums you can afford will also be a consideration.

While there is overlap between many trades, what is recommended for, say, a shop or online business may differ from a builder or self-employed accountant.

You know your own business better than anyone, and this means you should have in-depth knowledge of the potential risks associated with your business. Use this knowledge as your guide when deciding which business insurance policies to take out.

How to decide on the business insurance cover you need

As a starting point, use the following questions to help you decide on the type of cover you require:

Do you have employees? If so, you’ll need employers’ liability insurance.
Are you a member of or part of an industry body that requires specific types and levels of cover? If you are, follow your industry body’s guidelines.
Do you work for clients that expect a minimum level of insurance? If your clients have insurance expectations, you could lose out on work if you fail to meet them.
Do you rent or own commercial premises? If you do, consider protecting your premises and everything in them with commercial building insurance and business contents insurance.
Do you come into contact with the public on your own premises or elsewhere? If you come into contact with third parties in the course of your work, public liability insurance is advisable.
Does your business hold stock or equipment? To protect stock and equipment, consider taking out business equipment insurance.
Do you have expensive tools that you need to cover? If you want to protect your tools from theft, tool insurance could help.
Does your business operate online? The internet comes with its own risks, some of which can be mitigated with the right cyber insurance policy.
Could your business survive if you couldn’t trade for a time due to unexpected events? If you’re worried about this, consider business interruption insurance.

Check out our handy guides to the business insurance needed for different jobs, professions and industries

How much does business insurance cost?

Depending on your line of business, and the type and level of cover you need, business insurance premiums can cost anywhere from a few pounds a month to considerably more.

Factors that could affect the cost of your business insurance premiums include:

the industry you work in
whether you have employees
if you have premises, and where your business is located
the size of your business
if you’ve made any previous insurance claims
the risks your business is exposed to
the level of cover you want to take out

For example, a sole trader working from home with an online business is likely to pay less for their insurance than a business with employees and a few commercial premises that are open to the public. So you will only want to get the cover you actually need.

The only way you’ll know for sure is to get a business insurance quote based on the cover you need.

How can I reduce the cost of my business insurance?

Some of the best ways to keep your business insurance costs to a minimum include:

Bundling with one insurer: Buying more than one policy with an insurer might cost less per policy than if you had bought those same policies individually. A bundle of relevant policies could also be easier to manage than several standalone policies.
Altering your excess: This is the amount you agree to pay when you make a claim on your insurance policy. Insurers set a compulsory excess, but if you add a voluntary excess, it could reduce your premium. Bear in mind that this means you will have to pay more if you claim on your policy.
Shopping around and comparing quotes: Doing this when you buy cover, or before your policy automatically renews, can help you find the most competitive business insurance quotes.
Showing that you run your business well: Evidence of risk assessments, audits and quality control measures could help to reduce your costs.

Business insurance insight

If you’re not sure whether business insurance is worth it, figures from the Association of British Insurers (ABI) reveal that around £22 million is paid out in business insurance claims every day.

How to get business insurance

When getting a quote for business insurance, you will usually need to provide the following information:

your contact details
whether you are a sole trader, limited company or partnership
your main business activity
the date you started your business
your estimated turnover for the next 12 months
how many people work for your business
which policies you’d like to buy
the level of cover you need
details of any previous insurance claims

It’s a good idea to consider business insurance from the moment you start your business. It’s then important to regularly review your insurance needs as your business grows.

It is a legal requirement to have employers’ liability insurance if you employ anyone in the UK who isn’t an immediate family member. If your business uses any vehicles you must have motor insurance: either commercial van insurance or commercial car insurance.

Most other types of business insurance are optional, though some industry regulators and clients require you to have certain types of cover. For example, solicitors, accountants and architects usually need professional indemnity insurance. Even though it’s not a legal requirement, some clients might ask that you have public liability insurance before agreeing to the work.

Business insurance can get complicated. If you feel like you could benefit from some expert help choosing the right policies at the right prices, then you could consider using a business insurance broker. These insurance experts can act on your behalf when dealing with insurers. Not only can a broker help you pick the right business insurance policies, they can also help keep your coverage up to date and if you have to make a claim.

Just because you work for yourself, that doesn’t mean your business isn’t exposed to various risks. In fact, with no legal distinction between sole traders and their businesses, the stakes can be even higher for self-employed business owners.

If you’re a sole trader with no employees, you may not legally need insurance, but it may still be useful to have cover to protect you. Not least because if your business goes into debt, you face unlimited liability – meaning you are personally responsible for settling all the debt.

If you’re self-employed and employ other people, you are legally required to take out employers’ liability insurance. Although it’s not legally mandated, you may also need professional indemnity insurance or public liability insurance for your business activities, depending on the requirements of regulatory bodies in your sector.

Since self-employed workers can’t access sick pay, sole traders, freelancers and side hustlers could also benefit greatly from income protection insurance, which can cover a portion of your lost earnings if you’re unable to work due to illness or injury.

Whether your online business needs insurance depends on your operation. If you have any employees, you are legally required to have employers’ liability insurance. It may also be useful to have other kinds of insurance based on what your business does.

For example, if you sell items online, you may want product liability insurance, or if you offer advice, you may want (or need) professional indemnity insurance. You may also want to consider other specialist types of cover, such as cyber insurance. This can provide cover for online data and security issues, among other risks.

Working from home has its own set of risks, so it could still be a good idea to take out insurance for your home business.

If you employ anyone in the UK who isn’t an immediate family member, then employers’ liability insurance is a must.

And while you don’t have business premises to worry about, you should consider the other risks associated with your line of work. For example, if you provide professional services or expert advice, professional indemnity insurance could be a good idea. And if you’re involved at any point in the life cycle of a product, then you should consider taking out product liability insurance.

Meanwhile, cyber insurance could protect your digital operations, and if clients visit you at your home, consider taking out public liability insurance to cover yourself in the event of injury or property damage involving a third party.

It may be possible to get business insurance if you have had debt issues that have led to an individual voluntary arrangement (IVA) or a county court judgement (CCJ). But the insurer may see you as riskier to insure, which could make the process more difficult.

If you are offered business insurance, your policy premiums may be more expensive. You might need to go to more specialist insurers and brokers to find someone willing to cover you.

Be truthful if you or any of the business’s directors or partners have had any CCJs, bankruptcies or IVAs. Otherwise, your insurer could cancel your policy or not pay out on a claim later on.

If the insurer doesn’t ask, they may assume you don’t have any CCJs, bankruptcies or IVAs to your name. This will be set out in the assumptions in the terms of your insurance, so read the paperwork carefully and let your insurer know if they’ve made any incorrect assumptions.

If you need to make a claim on your business insurance, check that particular loss is covered and contact your business insurer or broker as soon as possible. You’ll need to supply evidence to support the claim and fill in the paperwork.

If you suspect that someone is going to make a claim against you, give as much information as possible, including the name of the person. Don’t talk about or negotiate the claim with them before talking to your insurer.

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