Maria Peloponisiou~ 5 min Reading time | 17. Sep 2019
Although starting a new business requires a lot of healthy optimism, it’s important to be prepared for the worst as well. Accidents, property damage, and other random misfortunes will cause a lot more trouble for someone who is blindsided by them than someone who is prepared. Often, being prepared means having insurance – but what types of insurance do you need? Here, we’ll cover the basics of business insurance: what you need to have, what you might consider as an option, and why.
There are some types of insurance that you will be legally required to carry, and others that, while not mandated by law, you may want to consider depending on the amount of risk you’re assuming. The types of insurance you’re legally required to have are minimal and will depend on the type of business you own. Although it’s an added expense, it’s important to weigh the monthly cost of insurance against the likelihood of the potential cost of the emergencies it protects you from.
Insurance You Need by Law in the UK
Businesses that employ staﬀ are required by UK law to have employers’ liability cover, a type of insurance which covers you in the case of lawsuits by staﬀ who become sick or injured as a result of their work for you. Even if your workplace is a relatively safe one, such as an oﬃce, neglecting to have this type of insurance can cost you fines of up to £2,500 in fines per day if you are caught without it. There are a few exceptions to this rule, such as businesses that employ close family members and public sector businesses – but in general, as long as you have even one employee, you are required to have liability insurance. In the case of contractors, this can get complicated, since whether or not they can make a claim depends on whether or not they can legally be classified as employees under UK law. If you are unsure, make sure to do your research.
Depending on your business type, you may also be required to take out professional indemnity insurance, which covers you in cases of claims of professional negligence. Although the first thing that may come to mind is giving unsound advice or making unsound claims, professional indemnity insurance also encompasses loss of important documents, breaches of confidentiality, and defamation claims. Accountants and legal professionals are required to be covered by this type of insurance, as well as health professionals – but there are other business types that, while not legally required to have it, might benefit from coverage. For example, if you’re providing professional consulting which might aﬀect the bottom line profits of a business, or your business sells a product that makes any health claims, you might be wise to consider this type of insurance.
Other Insurance You May Need to Consider
Public liability insurance might be a good consideration if you have a business with a storefront, or one that customers visit, since it protects you from claims of injury caused by visiting the premises of your business. This type of insurance sometimes also includes product liability insurance, which protects your business if anyone is injured as the result of something you have sold, made or repaired. Businesses in the food service industry often have product liability insurance to protect themselves, since even if food is prepared carefully, it’s not always easy to prevent foodborne illness and allergic reactions. Selling toys can also be risky too, since it is easy to unintentionally sell something that may pose a safety threat to young children, so business owners that sell toys and childcare products often have product liability insurance as well.
You can also consider commercial property or commercial vehicle insurance to protect damage to your business property and stock in the case of natural disasters or theft. This might be a useful one to consider if your business operations rely heavily on a vehicle or if you have a lot of valuable stock sitting at home or in a storefront. Commercial property insurance can also include protection for goods in transit, to prevent financial losses from damage to goods during shipping.
Business interruption insurance helps protect your business following an accident or disaster. Unlike property insurance, which only covers the immediate value of property damage, business interruption insurance provides coverage for the loss of income incurred while the business is unable to operate due to unforeseen circumstances. Contingent business interruption insurance is an extension of this type of coverage, which covers you in case a supplier or client is unable to do business with you due to an unexpected event like a natural disaster.
Do I Need Business Insurance to Work From Home?
If you’re a freelancer that doesn’t employ anyone and you’re working from home, you may not legally need business insurance. However, that doesn’t mean it’s not worthwhile to consider it as an option, depending on what type of business you have. If you have a home oﬃce and the equipment you need for work is at home, you may think that homeowner’s insurance will cover you in the case of loss – but sometimes the amount you’re able to claim from homeowner’s insurance doesn’t reflect the value of the commercial property you’re keeping at home. If your income depends on selling things online, for example, it may be worthwhile to invest in commercial property insurance to protect your stock. You’ll likely have the option to add business interruption insurance to the policy in case your home is damaged as the result of a natural disaster. If you work as a freelance consultant, you may want to look into professional indemnity insurance, or public liability insurance if clients routinely visit you at home.
Ultimately, if you work on your own from home, whether or not you invest in insurance is up to you. Some types of insurance will be irrelevant to your line of work, and some insurance companies may try to sell you insurance you don’t need, so it’s important to do your research to determine what the best fit is for you. It’s one of those things that doesn’t seem important until you really need it – and if you do, you’ll be glad it’s there!