Business insurance protects you when things don’t quite go according to plan – whether that’s an accident, damage to your property, or more. Without business insurance you could find yourself with a hefty repair bill, or even a massive lawsuit.
The only type of insurance required by law is Employer’s Liability Insurance – but depending on your business, you’ll need different types of insurance. You can choose a ready-made business insurance package that covers all of the below – a comprehensive business policy. Or you can pick and mix. Here’s our rundown of the most common business insurance types for SMEs.
Business property insurance
First up is insurance for your premises and your equipment. Buildings insurance will cover your office or shop, and this generally includes fixtures and fittings insurance too (eg all the parts that are built into your office or shop). Contents insurance is for things like desktop computers and furniture, whereas laptops will fall under portable equipment insurance. If you’re running a shop, you can cover items to be sold under stock cover; and if you’re working with specialist tools you can cover them too under tools cover.
Example: Someone breaks into your property and steals your laptop and your favourite wheely chair. As long as you have both portable equipment insurance (or a contents insurance policy that specifies that it includes things like laptops too), you’ll be protected.
Who needs it? All types of businesses, but it’s not a legal requirement.
Public liability insurance
Public liability insurance is insurance that covers you in the event of a client, a member of the public, or a contractor coming to harm on your property . You’re also protected if you’re working at a client’s property or home and something goes wrong, or if one of your employees is.
Example: You’re a busy hair salon, and one of your employees makes a round of tea and coffees for those having their hair done. As the employee goes to set the tray down they stumble, and the cups fall onto a customer who’s been left to wait for their hair colour to develop. The customer is injured, and decides to sue your salon. Without public liability insurance, you would have to foot a massive bill.
Who needs it? Businesses working with the public. Often clients won’t work with you unless you have it (some contracts even specify the amount you need to be covered for, and this can be well into the millions of pounds). Businesses that work remotely, such as selling online, may not need it. If your only contact with the public is at events, you can get one-off insurance.
Product liability insurance
Product liability insurance, like public liability, covers you should a member of the public come to harm on your property – with one crucial difference, which is that it covers damage caused by something that you have made, supplied, or installed.
It’s not a warranty, however – if your product stops working or isn’t working like it should, that’s a separate problem. If your product harms someone or someone’s property, that’s when product liability insurance comes into play.
Example: You’re a plumber salesperson installing a customised bathroom that you designed and manufactured for a client. Without realising, you use the wrong size screws to install the side of the bath. When the client has a bath, the water leaks out and floods the bathroom floor, causing damage to the ceiling and floorboards. But thanks to your product liability insurance, you’re covered and able to meet the costs without facing a huge bill.
Who needs it? As it’s similar to public liability insurance, some companies offer both combined. But you can need it without needing public liability insurance, for example if you’re a solely online business – in this case, making sure your product is covered is invaluable.
Employer’s liability insurance
Employer’s liability insurance is a legal requirement, unless you’re exempt. This insurance covers the cost of compensation for employees who are taken sick or who have an accident as a result of working for you.
Example: You’re having some building work done on the new office, and there are lots of exposed wires about. An employee comes into contact with one when their hands are wet, giving themselves an electric shock that lands them in hospital. Employer’s liability insurance means you’re protected financially when they put in a claim against you.
Who needs it? As mentioned above, everyone – but most public organisations (such as NHS trusts and government departments) are exempt. If you’re the only employee and own 50% or more of share capital in the company you’ll be exempt too; and if you run a family business where everyone in the business is closely related to you, you’ll be exempt (unless the business is incorporated as a limited company.)
Professional indemnity insurance
Professional indemnity insurance protects you if you’ve made a mistake at work that means your client will suffer a financial loss. It’s not the same as providing them with a bad product or direct service – that’s covered by warranties. It’s for bad advice or design that you provide and that your clients act on in good faith.
Example: You’re an accountant who provides bad advice for a client on how best to deal with their finances, and as a direct result they lose a lot of money. Professional indemnity insurance will cover the cost for them, however, and also possibly your legal costs (depending on how much you’re insured for).
Who needs it? It’s often seen in professions such as management consulting, architecture, IT, engineering, and financial and tax services (such as accountants and bookkeepers).