If you are a small business owner it can be difficult to decide what sort of insurance you need to take out. Some policies are required by law, and some are up to your own discretion. The type of insurance you need is largely determined by the type of business you run, the size of your business, and what sort of assets require protection.
If you operate your business in the United Kingdom and employ one or more staff members then you need to take out Employers’ Liability Insurance as stipulated in the Employers’ Liability Insurance Act 1969. This type of insurance pays out if an employee is injured during the course of their work, or becomes ill as a direct result of working for the company, and decides to claim for compensation. Some businesses are exempt from this legislation, including government departments, and non-limited family businesses, but most business owners must comply.
The minimum level of cover offered by Employers’ Liability Insurance is £5 million although the majority of businesses opt for a higher level of cover; a £10 million policy is more often taken out by even quite small companies. You may decide that an even higher level of cover is required depending on the size of your business, and the risks posed to your employees. If you fail to take out Employers’ Liability Insurance you may be fined by the Health and Safety Executive (HSE); fines can be as high as £2500 per day. The HSE also has the authority to close down businesses who fail to comply with the law.
When you take out Employers’ Liability Insurance you will receive a certificate which must be displayed in a prominent location within your business premises. The law states that employers must keep this document for at least forty years, and that it must be produced to the HSE if requested; failure to do so can incur a fine of up to £1000.
Employers’ Liability Insurance is only valid in the United Kingdom. If you also employ staff outside of the UK you will need to comply with the legislation of that particular country.
If you, or your staff, drive a vehicle during the course of your work you are also required to take out motor insurance. Depending on how many vehicles you run you can take out individual policies or fleet cover. A fleet cover policy may prove to be more cost effective if your business runs a large number of vehicles.
Another type of business insurance that is required by law is Professional Indemnity Insurance, although this type of policy need only be taken out by those individuals in certain professions including financial advisors, lawyers, and accountants.
In addition to obligatory insurance policies as a small business owner there are also a number of other business insurance policies available to you. Public liability insurance is one such policy, and it is designed to protect you from claims from individuals outside of your business who have suffered an injury, or whose property has been damaged as a direct result of your business activities. If you come into contact with members of the public, either at your premises, or theirs, then taking out a public liability insurance policy should be high on your list of priorities.
Property insurance is also an important type of business insurance policy. This type of policy will protect your business premises, and its contents, in the event that they are damaged, destroyed, or stolen. It is important when taking out this sort of policy that you gain an accurate figure as to how much the contents of your business premises are worth; if you under-insure you may be left with a significant shortfall in funds.
If you own the building from which you work you should also make sure that it is adequately insured. This property is likely to be one of your biggest assets so you need to make sure that you won’t be out of pocket if it is damaged by fire, flood, or a similar event.
Another type of policy that you may want to consider is business interruption insurance. This type of policy pays out if you are unable to work due to your business property being destroyed, damaged, or stolen.
Professional indemnity insurance is designed to offer protection to individuals who sell their expertise and knowledge to their customers. If you provide advisory or consulting services, or produce designs, and your client loses money because you have made a mistake they may claim for compensation. Professional indemnity insurance will protect you and your business by paying for this compensation, and any associated legal costs.
As a small business owner it is vital that you research the business insurance policies that are available to you, and take out cover that best fits your needs and requirements. Some policies are required by law, and some are optional, but it certainly pays in the longer term to make sure that you have covered yourself, and your business, against every eventuality. If you are at all unsure as to what type of insurance cover you require it is advisable to consult with an experienced insurance broker who can assess your business in detail, and provide a policy, or policies, that will offer your business adequate protection.