Compare Business Insurance

What is business insurance?

Business insurance isn’t one single policy. Instead, it is an umbrella term for types of insurance that help to protect your business financially if something goes wrong. You can usually buy it as a package where you pay one premium for a number of insurance products.

The types of unexpected events a business might face include damage to property, stolen stock, injuries to employees or customers, loss of income and negligence claims.

Types of business insurance

Below are some of the main forms of business insurance and what they cover.

Employers’ liability insurance

This helps cover the cost of claims if an employee gets injured or ill during their work. Businesses with at least one employee legally need employers’ liability insurance. The only exceptions may be if they are a close family member or are based abroad. And if your business is incorporated as a limited company, you’ll need employers’ liability insurance even if you employ members of your family.

» COMPARE: Employers’ liability insurance

Public liability insurance

This is similar to the above, except, instead of covering employees, it covers the cost of compensation claims if anyone – a member of the public, for example – who is injured or dies as a result of an incident at your business premises or elsewhere as a result of your business activities.

Public liability insurance can also cover you if your business is responsible for any loss or damage to a third party’s property.

Some clients may ask that you have this cover before beginning any work or trading with you.

» COMPARE: Public liability insurance

Product liability insurance

This helps cover your business if a product you designed, manufactured or supplied,, or even gave away for free, causes damage or injury to someone or their property. This may also cover you for claims made if you repaired, refurbished or altered a product that then caused damage or injury. You may not be covered by product liability insurance if a product is faulty because of poor workmanship or a lack of care by your business.

Professional indemnity insurance

This covers financial loss to a client due to negligent advice or services provided by your business. Examples of professions that need this include chartered surveyors and solicitors, but anyone who offers expert advice or information may want to consider it.

» COMPARE: Professional indemnity insurance

Business contents insurance

This covers your business’s belongings and can include stock or equipment that’s lost, damaged or stolen, along with furniture and fittings such as windows. Business contents insurance can also cover visitors’ belongings when they’re on your premises.

You may be able to add money cover or goods in transit cover, for example, to insure against loss or theft, or damage to goods in a road accident, if that’s relevant to your business.

» COMPARE: Business contents insurance

Business buildings insurance

If you own your business premises, you may also want to consider commercial property insurance to help cover the cost of repairing damage to the property after an unexpected event, such as a fire or a flood. If you rent premises, the owner should have landlord insurance, but this won’t include your business contents, such as equipment and furniture.

» COMPARE: Business buildings insurance

Why 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. This could help to ease the burden on your business finances and avoid what could be high and potentially unmanageable bills.

Having business insurance can also help demonstrate to clients and customers that you’re a trustworthy, credible business.

If you’re wondering if businesses call on their insurance, according to the Association of British Insurers (ABI), providers pay around £22 million to businesses every day through business insurance claims.

Who needs business insurance?

Some cover is compulsory for certain types of businesses, but for others it’s up to you to decide if they are worth getting.

• If your business has one or more employees you must have employers’ liability insurance. It doesn’t matter whether an employee is full-time, part-time or a contractor, you need at least £5 million worth of cover if anyone works for you. Without it, you could be fined up to £2,500 each day that you don’t have this cover.
• If you use vehicles to run your business, such as a delivery van, you must legally have commercial vehicle insurance. If your business uses vehicles for more general purposes, such as sometimes driving clients or employees or moving goods, you will need business car insurance.

Businesses in certain industries may also need other forms of insurance. For example, solicitors, accountants and architects usually need professional indemnity insurance. And some clients might ask that you have public liability insurance before agreeing to the work.

When do I need business insurance?

From the moment you start your business you can consider business insurance policies to reflect everyday or occasional risks you face.

Then if your business grows, diversifies or changes, you might need other types of insurance to reflect that. That might mean hiring new employees, taking your business on the road, exhibiting at trade shows or employees working from home – all of which present new risks.

Even without these changes, it’s a good idea to regularly review the risks associated with your business, and your current insurance policies. As well as getting the right cover amount, telling your insurer about these changes can help reduce the likelihood of a refused or reduced claim payout if an insurer thinks you’ve misrepresented or withheld information.

What types 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 come into it. While there is overlap between many trades, what is recommended for, say, a shop or online business may differ from a freelancer or self-employed accountant.

If you’re a founder or a director, you may want to consider directors and officers liability cover, sometimes called management liability insurance. This protects you from claims against you as an individual for issues such as misadministration or errors at work. Read the small print so you know exactly which scenarios are covered.

You have in-depth knowledge of the risks attached to your business, so use this as your guide for policies worth taking out. Business insurance can be tricky to get to grips with, so if you need help deciding the types you need, a business insurance broker or financial adviser can help.

» MORE: Do I need a business insurance broker?

Do self-employed people need business insurance?

Even if you work for yourself, you can still face risks. If you’re a sole trader, you may not legally need insurance but it may still be useful to have cover to protect you.

If you’re self-employed and employ other people, you need employers’ liability insurance. You may also need professional indemnity or public liability insurance for your business activities, depending on the sector you work in.

Without insurance, you would have to shoulder the costs of problems your business faces.

» COMPARE: Self-employed insurance

Do online businesses need business insurance?

Whether your online business needs insurance depends on your operation. If you have any employees, you will need 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.

» MORE: Business insurance for online retailers

What is covered by business insurance?

Business insurance can cover lots of scenarios. Some examples include covering some or all of the cost of:

• replacing lost of stolen stock and equipment
• damage to property due to a fire or flood
• losses due to not being able to work or trade for a time
• compensation claims brought against you for negligence

There are also more specialist insurance policies that cover particular risks of certain industries and businesses. These include cyber insurance or courier insurance, for example.

Whichever policy you take out, check exactly what cover is provided. 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.

What level of insurance does my business need?

Every business’s requirements are different. So assess your own situation and research what kind of insurance cover is available to help you make a decision.

To help, you could ask yourself:

• Do I have employees?
• Am I a member of or part of an industry body that requires specific types and levels of cover?
• Do I work for clients that expect a minimum level of insurance?
• Do I rent or own commercial premises?
• Do I come into contact with the public on my own premises or elsewhere?
• Does my business hold stock or equipment?
• Do I have expensive tools or equipment that I need to cover?
• Does my business operate online?
• Could my business cope if it couldn’t trade for a time due to unexpected events?

Any claims or disruptions to your business could end up being very costly. Spending a little time looking at the choice of insurance policies available can help you pick the right level of cover.

Advantages and disadvantages of business insurance

As with any business outgoing, it’s worth being aware of the pros and cons of taking out business insurance.

Advantages

• It can help cover financial costs if something goes wrong.
• It can offer peace of mind that you’re covered if the worst happens.
• It can help you meet legal and professional requirements.
• It can give your employees, customers and clients confidence that you take their health, safety and finances seriously.
• It’s an allowable business expense, so it’s tax deductible.

Disadvantages

• It is an added expense.
• You may not be covered for every eventuality.
• You will usually need to pay an excess up front towards a claim.

How much does business insurance cost?

Premiums can start from under £10 a month, but that won’t necessarily be what you will pay, especially if you need more than one type of cover. Factors that insurers consider include:

• the industry
• 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.

You can get a business insurance quote to find out the likely cost for you based on the cover you need.

» MORE: What does public liability insurance cost?

How to reduce the cost of your business insurance

If you’re looking to pay less for your business insurance, you might consider one or more of the following options:

• Buying a business insurance package, where you buy more than one policy with one insurer. This might cost less than individual policies and could be easier to manage than buying several standalone policies.
• Altering your excess, which 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 you would pay more if you had to claim on your policy.
• Shopping around and comparing quotes, when you buy cover and before your policy automatically renews, can help you find the most competitive prices.
• Show that you run your business well, with evidence of risk assessments, audits and quality control measures.

How to apply for business insurance

When you apply for business insurance, along with contact details you will usually be asked:

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