Do I need business insurance?

Professional indemnity insurance covers risks in association with your professional services. It protects your business from legal and compensation costs that arise should a client make a claim against you, under circumstances such as:

• Defamation and libel
• Loss of documents or data
• Professional negligence

There are several types of insurance that a contractor may benefit from. These policies are known as:

Professional Indemnity Insurance - in case a client sues for making a costly mistake whilst undertaking contractual duties such as the loss of data or unintentional breach of copyright.

Public Liability Insurance - in case a member of the public is injured, or property is damaged as a result of the actions of the company (or its employees).

Employers Liability Insurance - in case an employee is injured (or worse) whilst working for the company. Often mandatory for any company's that has more than one working employee.

Occupiers' liability insurance, otherwise known as public liability insurance covers the occupier of a premises from legal and compensation costs that arise due to injury or property damage to a third party. For instance, if a customer trips over a loose wire at your office and makes an injury claim, this insurance product will cover the legal costs and compensation payment.

Every small business owner needs some combination of business insurance for financial and legal protection against liability in a crisis.

Yet, with limited resources, it can be tempting to look into cutting costs whenever you can. That could mean deciding to purchase only business insurance that you're legally required to have.

But that's overlooking the fact that an uninsured accident could potentially sink your business.

In an Inc. article, startup founder Leo Welder shared about his decision to skip out on a intellectual-property litigation insurance while he was in the process of purchasing general insurance policies for his business.

This proved to be a costly mistake. When his company was later embroiled in a lawsuit with a publicly traded company, he wound up paying several hundred thousand dollars in legal fees.

Looking back on his experience, his advice for fellow business owners is: "It's not just a matter of 'Can I afford this?' but a question of 'Can I afford not to have this?'"

With many different types of business insurance available, it can be difficult figuring out exactly what you need.

Here's when our guide comes into the picture. Below, we answer FAQs concerning business insurance.

If you've hired at least one employee, employer's liability insurance is a legal requirement for most UK businesses.

And while other types of cover aren't mandatory, you'll most likely want to consider business insurance products such as:

• Professional indemnity insurance
• Public and product liability insurance
• Business contents insurance
• Cyber insurance
• Management liability insurance

Public liability insurance covers compensation claims made against your business by a third party for injury or damage. For example if a supplier trips on a trailing cable in your shop, or if you visit a client and spill coffee on their computer.

General liability insurance isn't available in the UK.

Employer's liability insurance is the only cover that is mandatory by law for most companies who employ at least one employee.

As a self-employed person or small business owner, having the right insurance is everything.

Most businesses don't consider their doors open and ready for customers without a full battery of liability and premises insurance protection. And for good reason.

Insurance isn't just something you have to have according to laws or industry regulations; it's a type of legal and financial protection that every business needs, no matter how big or small.

While everyone can see the importance of insuring your physical building and its contents, it may be more difficult to see the big picture when it comes to liability insurance. Why do you need so much insurance, why so many layered policies?

That is exactly what we are here to answer today.

Different types of business insurance cover different risks. Public liability insurance covers compensation claims made by a member of the public, while professional indemnity insurance covers you if you're sued by a client. Employers' liability insurance covers compensation claims from employees.

The price of your employers' liability insurance will vary, depending on the number of employees you have, the industry you operate in, as well as the type and level of risk your business faces most often.

To give you a rough idea, here are a few examples of the approximate costs you can expect to pay:

• According to AXA, 10% of their employers' liability insurance customers paid £42 or less for their cover in 2020
• NimbleFins indicated that the average cost of employers' liability insurance ranges from about £61 per year for a single office worker, up to £213 or more for a trade worker for a small to medium-sized business in the UK.
  

To obtain a more accurate estimate, your best option would be to run an online quote with the insurance provider you're looking to purchase from.

As a self-employed person-whether you're running a full-time freelance gig, or hustling on the side-you'll need to think about the risks you face and whether business insurance could be a good idea.

In this article, our business insurance partner, Superscript, explains the covers you may want to consider getting.

While public liability insurance isn't compulsory, you should think about taking out public liability as part of your business insurance policy anyway, as it can protect you if someone makes a claim against you for injury or damage to property suffered because of your business.

Covering compensation payments and legal costs if a member of the public sues your business because they've been injured or their property has been damaged, public indemnity insurance is highly recommended for all businesses. Many professions need to have p insurance as part of their respective industry body's regulatory requirements and so always double check your contractual agreements.

Professional indemnity insurance is designed to protect you if your client suffers a financial loss as a result of your professional services. It covers the cost of your legal defence and compensation you need to pay to a client for a claim made against you.

The retroactive date on your professional indemnity insurance is the date from which you've held uninterrupted professional indemnity insurance, or a date in the past from which your insurer has agreed to cover you.

Both public liability and employers' liability insurance are business covers that can pay out if your business faces a compensation claim for injury. The difference is that public liability insurance covers claims made by a third party (i.e. a member of the public like a client, customer, supplier or passerby), while employers' liability insurance covers injury claims made by an employee.

Public liability insurance covers your interactions with third parties (by this definition, anyone who isn't your employee).

If your business causes an injury or property damage to a member of the public, public liability insurance will cover you for the resulting legal and compensation costs.

The cost of a professional indemnity insurance policy depends on several factors. As with other types of insurance, insurers will calculate the price of your professional indemnity insurance (your premium) based on a number of things, including the type of business you run and the level of cover you select.

Covering legal costs and expenses in your defence as well as any damages or costs that may be awarded, professional indemnity insurance comes highly recommended for those providing professional services. Many professions need to have professional indemnity insurance as part of their respective industry body's regulatory requirements and so always double check your contractual agreements.

Employers' liability insurance is meant to protect employers from financial losses following work-related accidents. It covers the compensation costs and legal fees that result from being sued by an employee or ex-employee for illness or injury caused by their work in your company.

While product liability insurance isn't a legal requirement, you may find that manufacturers, suppliers, distributors or retailers you work with will require you to have it.

Depending on the industry you operate in or professional bodies you're a part of, it may be a requirement to have professional indemnity insurance. Alternatively, you may decide that you need this cover if your business gives advice, offers a professional service, or handles client data or intellectual property.

Product liability insurance covers compensation claims and legal fees if someone sues you because they've been injured or their property has been damaged by one of your products.

The law requires most employers to have at least £5 million of employers' liability insurance, and the fine is a maximum of £2,500 for every day that you don't have this cover. In practice, most insurers will give you £10 million of cover as standard, so you don't usually have to choose a cover level when you're buying your employers' liability insurance.

As a contractor working through your own limited company, it is recommended that you are covered by business insurances whether that be for your own peace of mind or in fact something that is mandatory in your contract.

Product liability insurance is designed to cover legal and compensation costs that are incurred when an individual is injured, or if their property is damaged by your product.

Errors and omissions insurance and professional indemnity insurance are different terms used to refer to the same insurance cover. 'Errors and omissions insurance' is more commonly used in the US, while the term 'professional indemnity insurance' is typically used in the UK.

Professional indemnity insurance is designed to protect you against legal liability for breach of professional duty while carrying out your business activities. For instance, if a client believes that your service is inadequate or if you've made a mistake, the insurance will cover you against claims the client makes against you.

For most employers, it is mandatory to have at least £5 million of employers' liability cover, or face a fine of up to £2,500 per day. There are some exceptions to this rule, however: most public organisations and businesses that only employ close family members (as long as they're not incorporated as limited companies) don't necessarily need to have employers' liability insurance.

• What is business insurance?
• Why do I need business insurance?
• Types of business insurance
• Professional indemnity insurance
• Public and product liability insurance
• Business contents insurance
• Employers liability insurance
• Cyber insurance

Public liability insurance and professional indemnity insurance are both business insurance covers designed to cover compensation claims. However, the types of compensation claims they cover can be quite different.

Public liability insurance can cover compensation claims if you're sued by a member of the public for injury or damage, while professional indemnity insurance can cover compensation claims if you're sued by a client for a mistake that you make in your work.

Whether you can get public liability insurance with a criminal record depends on a number of things, including the details of your criminal convictions. Although some insurers won't provide insurance to anyone with a criminal record, some will provide it in certain circumstances.

You can purchase business insurance before you obtain your trade licence. However, if you start trading without having the required licence, your policy may be deemed invalid.

Business insurance is designed to protect you from the risks associated with running a business.

As a business owner (whether you're a sole trader, or are running a partnership or a limited company), the onus is on you to think about the risks you face as a business-and to get them covered.

While some risks and their accompanying covers are common to most businesses, others are more niche. The protection you'll need will depend on the risks your business faces.

Personal liability insurance protects you from legal and compensation costs due to injury or property damage to a third party.

It is fairly uncommon to take out this type of insurance, as it is unlikely that your personal activities would pose a risk of injury or accident. However, if you're self-employed or a business owner, there's a good chance that you'll be interacting with customers or the general public on a day-to-day basis. As such, taking up public liability insurance-the commercial equivalent of this cover-is something you'd want to consider.

Public liability insurance is designed to protect against legal and compensation costs for any accidents that your business is liable for, injuring or causing damage to the property of clients, suppliers, or members of the public.

Public liability insurance claim examples:

1. Claims made against an electrician:

An electrician was engaged for the installation of a heating system in a commercial building. However, the installation was incorrectly done and caused a fire resulting in damages to the property, which amounted to £50,000. The electrician's insurance policy covered the cost of damage.

2. Claims made against a furniture assembler:

A cabinet that the furniture assembler had fitted fell from the wall, and caused injury to another contractor. The furniture assembler was required to pay just £250, as his insurance policy was able to cover the majority of the costs (£25,235).

You can usually choose between £50,000 and £5 million of professional indemnity insurance. Your regulator, professional body or client contracts may indicate you the minimum amount you need. You should also consider the scope of your projects and the potential compensation demand if something went wrong.