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Just as small businesses come in all shapes and sizes, there are many different types of small business insurance, ranging in size, scope and purpose.
The important thing to remember is that business insurance isn’t one specific policy, but more typically, a package of products covering a range of scenarios.
What types of business insurance do I need?
The insurance policies you need will depend largely on the specifics of your business. If you use a van, for example, then you’ll need commercial van insurance, and if you sell products, you’ll need product liability insurance. Clearly the insurance needs of a plumbing business differ vastly to that of a legal consultant, though there may be some common ground.
Since it’s on you to take out the right policies (and the right levels of cover) to protect your business and your livelihood, we’ve created a simple guide to the different types of insurance policies you’re likely to come across and should at least consider.
There are other business insurance options which aren’t listed on this page, so the most important thing is to do your own thorough research.
» MORE: Business insurance explained
What are the different types of business insurance?
You can generally place all business insurance policies into three categories, depending on who they are designed to protect: first party, third party, or both.
- First party policies cover direct losses to your business. A first-party policy could pay out for things like replacement tools or lost income while you’re unable to trade.
- Third party policies cover customers, members of the public and other individuals and entities beyond your business. A third-party policy could pay out, for example, if a member of the public was injured because of your work and claimed compensation.
» MORE: Do I need business insurance?
In the table below you can find out more about the most common types of business insurance and the risks they cover.
This should help you decide what insurance you need for your business.
| Insurance type | First or third party? | Description |
| Public liability insurance | Third | 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 | Third | If a client makes a negligence claim against you because they believe they lost money as a result of your advice or services, professional indemnity insurance could pay out to cover legal fees and compensation costs. |
| Product liability insurance | Third | Product liability insurance could pay out if a product you supplied (whether you manufactured it or not) made someone ill or injured them. |
| Employers’ liability insurance | Third | If one of your employees got injured, fell ill or, depending on the policy, died because of work they did for you, employers’ liability insurance could cover compensation and legal costs. |
| Business contents insurance | First | Business contents insurance could cover the cost of repairing or replacing equipment stored on your company premises if it was 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. |
| Tool insurance | First | If you work in a manual trade and your tools are stolen from a secure location (such as a locked garage or van), tool insurance could pay out to cover the cost of replacements. It may also cover damage or loss. |
| Commercial buildings insurance | First | Commercial buildings insurance could cover the cost of repairing your business premises in the result of damage by events like fires, floods or storms. |
| Personal accident cover | First | If injury, either at work or outside the workplace, stops you or a key person (named on the policy) from working, personal accident insurance could offer weekly payments to make up for your lost income while you recover. You could also receive a lump sum for permanent disability or a lump sum for your beneficiaries if you were to die as a result of an accident. |
| Business interruption insurance | First | Business interruption insurance could cover some of the potential shortfall in lost gross profit if your business couldn’t trade for an extended period of time because of an unexpected event, such as a fire or flood. |
| Legal expenses insurance | First | Fighting a claim made against you can be costly. Legal expenses insurance can cover your legal fees when contesting a claim in court. |
| Business car insurance or commercial van insurance | Both | If you drive any vehicle on UK roads, you need insurance. However, if you use a car or van for business purposes, you need specific business vehicle insurance. |
| Cyber insurance | Both | If there is a data breach at your company or your IT systems are damaged by a cyber attack, cyber insurance could cover the cost of making things right as well as providing compensation for customers affected by the data breach. |
| Directors and Officers insurance | Both | This policy 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 | Third | Run off insurance extends your professional indemnity cover to protect you from negligence claims based on events in the past. This kind of cover is designed to protect you after you wind down your business, covering claims which arise after you finish trading but which relate to the time when you were still in business. |
| Home business insurance | Both | Home business insurance isn’t a specific policy. Instead, the term encompasses a range of policies suited to anyone who runs their business from home. Cover can include indemnity and liability insurance, as well as cyber insurance and personal accident cover, depending on the needs of your business. |
| Business equipment insurance | First | With business equipment insurance, you can protect the essential day-to-day kit you use in the course of your job. The right policy could pay out for replacements if the moveable equipment you rely on is stolen, lost or damaged. |
| Business travel insurance | First | Business travel insurance is there to protect you if you have to travel for work – either domestically or overseas. Your policy could cover the usual things you’d expect from your personal travel insurance, plus extras like cover for samples and merchandise you’re carrying. You may even be able to get compensation for the cost of flying out a colleague if you fall ill and need someone to cover you in that big international meeting. |
| Courier insurance | Both | Again, courier insurance isn’t one specific policy but a package of business insurance policies designed to cover couriers. From carriage of goods for hire and reward insurance to courier public liability insurance, these policies offer protection and peace of mind if you deliver things for a living. |
This is not an exhaustive list of policies, nor will all of these policies be relevant to every type of business.
For more detailed information, it’s worth talking to your current insurer or checking out the insurance products available when you compare business insurance quotes.
What types of business insurance are legally required?
Employers’ liability insurance is a legal requirement for all businesses which employ people in the UK – assuming those employees aren’t your immediate family members, in which case, exceptions apply.
If you drive for work, it’s also a legal requirement to have business car insurance or commercial van insurance.
However, just because other forms of small business insurance aren’t legally mandated, that doesn’t mean you can afford to ignore them.
Your business is your livelihood, after all, so you should ensure your business is properly protected. Business insurance is a key line of defence for any business, and the right suite of policies could be worth it for the peace of mind alone.
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