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What Insurance Do You Need As A Small Business Owner?

Insurance can be a confusing and difficult topic at the best of times, but even more so when you’re just starting out as a small business.

With so many different types on offer and so much business jargon flying around, it’s hard to get to the bottom of what you actually need and what you don’t.

However, whether you’re going solo or managing a team, you need to make sure you’re covered should the worst happen.

While there are lots of different insurance policies out there, there are a few key ones that every small business owner should consider.

Here, we give you the rundown of the essentials and some common specialist insurance types.

Employer’s Liability Insurance

By law, if you employ one member of staff or more you must take out an Employer’s Liability policy. There are some exemptions, such as non-limited family businesses, but the vast majority of cases are legally required to do this.

As the employer has a general duty of care towards their staff, this insurance effectively covers your employees and sets out your liability towards them, should anything happen to them as a result of their employment with you such as illnesses or injury.

Nearly all businesses are required to hold a minimum cover of £5 million, which can be used to cover any compensation or legal action should an employee make a claim against you.

Construct A Quote advise that: “All business owners who employ any members of staff should take out this insurance as soon as possible. You can be fined up to £2,500 a day for cover that is absent”.

Public Liability Insurance

As with the above insurance, this one covers your liability towards members of the public and their property.

While it is not a legally required policy, if your business comes into contact with outside individuals in any way then it’s highly recommended that you consider this policy.

This covers any incidents that might affect the public or their property linked to your business. For example, if you own a deli and a customer trips over a loose wire, they may take legal action. Similarly, if you own a construction business and someone’s car is damaged during a project, they may be entitled to compensation.

This insurance can be used to cover all legal costs and compensation from your business.

For more information on whether you need public liability insurance, see this post by Start Ups.

Professional Indemnity Insurance

This insurance covers your business from any claims made against you by customers who believe that your recommendations or services have lost them money.

Again, while this isn’t legally required by most professions (although some regulatory bodies do require this such as lawyers and accountants), it’s highly recommended to any business providing advice or services to customers.

This insurance covers a number of aspects, including a breach/negligence of professional duty; misrepresentation or misstatement; breach of confidentiality; and employee dishonesty.

This can be particularly harmful to small businesses who often won’t have the legal capacity to take on claims, and so this insurance can cover any compensation or legal fees.

For more information on this type of insurance, see this guide.

Specialised Insurance

There are also a number of specialist insurance policies that will only affect particular types of business.

For example, if you are a construction business or tradesman, it would be recommended to get a Goods In Transit policy to cover your equipment and materials.

Similarly, if your business is renting houses, you will need specialist landlord insurance as standard building and contents insurance is not adequate for this type of cover.

If your business uses vehicles as part of your service, you will be required by law to get Third Party insurance or ‘fleet insurance’.

Finally, cyber insurance could be key for an IT company, which covers you from cyber-crime and risks.

If you’re unsure, it’s best to check with professionals what your type of business needs to ensure full cover.